Consumer Sentiment Sinks as Cost-of-Living Frustration Mounts — Evening Brief – 10.09.26

Consumers grew gloomier in early October as high prices and borrowing costs soured their view of current economic conditions and pushed inflation expectations higher.

Consumer sentiment fell to 46.3 in October’s preliminary reading, according to data released Friday by the University of Michigan Surveys of Consumers. Economists had expected 48.0, and the index stood at 48.1 in September.

Most of the decline came from current economic conditions. That index fell to 44.7 from 50.9 in September, while the consumer expectations index rose to 47.3 from 46.3.

“While year-ahead expectations for personal finances and business conditions crept up slightly, buying conditions for durables plummeted amid high prices and borrowing costs,” said Joanne Hsu, director of the Surveys of Consumers.

Sentiment also split along political and income lines.

Hsu said increases in sentiment among Democrats and Republicans were offset by a decline among independents. Confidence also fell steeply among lower-income consumers and those with smaller stock portfolios, groups with fewer resources to absorb price increases.

Inflation expectations edged up. Consumers expect prices to rise 4.7% over the next year, up from 4.6% in September. That is well above the 3.4% reading in February, before the Iran conflict began, and above every reading in 2024.

Five-year inflation expectations rose to 3.5% from 3.4%, notably higher than their 2024 range of 2.8% to 3.2%.

“Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year,” Hsu added.

The October figures are preliminary, and a final reading will follow later this month.