Macro
US consumer sentiment revised up to 48.0 in October, but inflation expectations climb for a second month
The University of Michigan's final October reading beat the 46.3 preliminary figure, while year-ahead inflation expectations rose to 4.7% and the long-run gauge to 3.5%.
HedgeWeekly News Desk ·
The University of Michigan's index of US consumer sentiment came in at 48.0 in its final October reading on Friday, revised up from the preliminary 46.3 that economists polled by Reuters had also expected. The index was all but unchanged from September's 48.1, yet it is still the second-lowest reading on record, behind the 44.8 low set in May, shortly after the Iran war began.
Beneath the headline figure, the two components moved in opposite directions. The current-conditions index dropped to 46.7 from 50.9. According to survey director Joanne Hsu, the whole decline came from views on buying conditions for durable goods, which fell 18% as higher interest rates and affordability weighed. The expectations index rose to 48.8 from 46.3. Sentiment improved among Democrats and Republicans, but independents fell to 42.4 from 47.7, only just above their May record low of 40.6.
Inflation expectations kept rising. Consumers now see prices up 4.7% over the next year, compared with 4.6% in September and 3.4% in February, before the conflict. Long-run expectations rose to 3.5% from 3.4%, above the 2.8%-3.2% range of 2024. Both measures have now increased for two straight months and are at their highest since May. Hsu said purchasing power is still the main thing shaping how consumers see the economy, and overall sentiment is 10% below a year ago and 15% below February.
Why it matters: the survey comes just before the Federal Reserve's rate decision on Wednesday, October 28. For rate-sensitive portfolios, the inflation-expectations figures count for more than the upward revision to the headline. Long-run expectations at 3.5% are well above anything seen in 2024, and the slump in durable-goods buying conditions shows high borrowing costs are already hitting big-ticket spending. Spot gold changed little after the release, trading at about $4,015 an ounce soon after 10am ET. The next test of the consumer is the November 3 midterm elections, which the survey suggests are being fought over cost-of-living frustration.
Sources
- Reuters via 102.7 WBOW: US consumer sentiment near record low ahead of midterm elections
- Kitco: Gold price trades near $4,000/oz after final Consumer Sentiment holds steady at 48
- ActionForex: US UoM sentiment holds at 48.0 as current conditions slump
- University of Michigan Surveys of Consumers
- Euronews: Oil tops $114 as European shares fall and Kering tumbles