US consumer sentiment deteriorated further in early October as rising prices linked to the Middle East conflict intensified concerns about the cost of living and weakened households’ views of the economy.
The University of Michigan’s Consumer Sentiment Index fell to 46.3 in October from 48.1 in September, missing economists’ expectations of 47.8, according to preliminary survey results released on Friday. The index was also 13.6% below its level a year earlier, highlighting persistent pressure on consumer confidence.
Inflation expectations increased alongside the decline in sentiment. Consumers expected prices to rise by 4.7% over the next year, up from 4.6% in September and substantially above the 3.4% recorded in February, before the US-Israeli war with Iran began. Their five-year inflation expectations also increased to 3.5% from 3.4%.
Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, said frustration over the cost of living was mounting across the political spectrum, with respondents increasingly believing that the economy had weakened since the beginning of the year.
Lower-income households and consumers with smaller stock portfolios recorded particularly sharp declines in sentiment, Hsu said, reflecting their limited capacity to absorb further price increases.
The deterioration comes as the conflict in the Middle East puts pressure on energy supplies and fuel prices, raising concerns that higher costs could spread through the wider economy. Rising energy prices can increase household spending on transportation and utilities while adding to businesses’ production and distribution costs.
The survey also showed a divergence between consumers’ assessment of current conditions and their expectations for the future. The index measuring current economic conditions fell to 44.7 from 50.9 in September, while the expectations index edged up to 47.3 from 46.3. Both measures remained below their levels a year earlier.
The worsening mood presents a challenge for the US economy because consumer spending is a major driver of economic activity. If households respond to rising prices and economic uncertainty by cutting discretionary purchases, businesses could face weaker demand.
However, sentiment surveys measure consumers’ perceptions and expectations rather than actual spending. The latest figures therefore point to growing concern about affordability and the economic outlook, but do not by themselves establish that household consumption has declined.
The University of Michigan plans to release its final October consumer sentiment results on October 23.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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