US consumer sentiment edged down to a five-month low in October as high prices and rising interest rates depressed morale. The University of Michigan's final sentiment index eased to 48 from 48.1 in September, according to the survey released Friday. Even so, that was an improvement from the preliminary reading and topped all estimates in a Bloomberg survey of economists. Consumers expect prices to rise 4.7% over the next year, up from 4.6% in the previous month. They also saw costs climbing at an annual rate of 3.5% over the next five to 10 years. Both were the highest since May.
After five years of above-target inflation, both short- and long-term inflation expectations have ticked up in recent months, exposing risks that elevated inflation expectations could become entrenched, Joanne Hsu, director of the survey, said. Consumer sentiment continued to deteriorate in October amid persistent inflation, tepid hiring and elevated mortgage rates. Prices at the pump remain well above $4 a gallon, compounding longstanding frustrations with the cost of living. In recent months, price increases have outpaced pay gains, further pressuring household budgets. Data out last week showed consumer prices rose in September at the fastest pace in five months.
Economic issues like the cost of living remain front and center for Americans in the final stretch of midterm campaigns. Consumers of all political persuasions agree that inflation is overwhelmingly the greater risk to the economy in the year ahead than unemployment, Hsu said. Sentiment among Democrats and Republicans improved somewhat in October, while sentiment among independents fell for a third straight month. A gauge of buying conditions for durable goods fell to a record low in October, with the report citing higher interest rates and rising affordability concerns. Nearly 70% of consumers expect interest rates to rise in the year ahead, the highest in more than three years. The current conditions gauge sank to the second lowest on record, while an index of consumer expectations improved for the first time since July. The survey period includes responses from Sept. 22 to Oct. 19.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing