Consumer sentiment fell this month amid frustration over high prices, according to the University of Michigan Surveys of Consumers.
The index of consumer sentiment fell 1.7 percent to 68.9 from 70.1 in September, but remains 8 percent higher than in October 2023. Despite the drop in sentiment, inflation continues to fall closer to the Federal Reserve’s 2 percent long-term target, dropping to 2.4 percent last month, according to the U.S. Bureau of Labor Statistics. Last month, the Federal Open Market Committee responded to falling rates by reducing interest rates a half percentage point to 4.75 to 5.00 percent.
The index tracking current economic conditions fell less than 1 percent to 62.7 from 63.3, and is 11.2 percent lower than 70.6 a year ago. The index of consumer expectations dropped 2 percent to 72.9 from 74.4 in September and is 23 percent higher than 59.3 last October.
“Despite widespread news coverage about the Middle East and Ukraine, few consumers connected these developments to the economy,” said Surveys of Consumers Director Joanne Hsu. “Concerns over these conflicts climbed this month but were relatively rare, mentioned spontaneously by less than 5 percent of consumers. With the upcoming election on the horizon, some consumers appear to be withholding judgment about the longer-term trajectory of the economy.”
Falling consumer expectations were also reflected in The Conference Board Consumer Confidence Index for September, which fell to 98.7 from 105.6 in August. The index based on consumers’ assessments of current labor market and business conditions fell 10.3 points to 124.3. The index based on consumers’ short-term outlooks for business, income and labor market conditions fell 4.6 points to 81.7, remaining above 80, the number which historically indicates recession expectations.
“The deterioration across the index’s main components likely reflected consumers’ concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings — even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages,” said The Conference Board Chief Economist Dana Peterson.