U.S. consumer sentiment edged lower in October, with independent voters still near their record low as concern over household costs persisted ahead of the midterm elections and the Federal Reserve’s next rate decision.
The University of Michigan’s Surveys of Consumers recorded an October index reading of 48.0, 0.1 point below September’s final figure. Only May’s 44.8 was lower in the index’s history. Independents registered 42.4, compared with their record low of 40.6 in May. The index draws on views of current finances, major purchases and the economic outlook over the next year and five years.
Joanne Hsu, director of the Surveys of Consumers, said, “Purchasing power continues to dominate consumer views of the economy.” Sentiment, she said, was 10% below a year earlier and 15% below February, just before the Iran conflict.
Since January, the share of independents citing inflation as a strain on their finances rose 27%; the corresponding increases were 52% among Republicans and 15% among Democrats. Five-year inflation expectations stood at 3.5%, after 3.4% in September and 3.2% in March.
Respondents with little or no stock-market exposure more frequently described high prices as a financial burden than at the start of the year. The American Automobile Association said gasoline averaged $4.29 a gallon Friday, down from $4.47 a month earlier.
Hsu said consumer spending had remained relatively resilient despite negative views of the economy. She cautioned that if households are buying sooner to avoid possible future price increases, it could become harder to bring inflation down.
President Donald Trump accused Iran of seeking higher oil prices in a Thursday Truth Social post, alleging Iran had fabricated “fake hits” and mines ahead of the midterms.
After a quarter-point rate increase in September, the Fed’s target range is 3.75% to 4.00%. CME FedWatch put the probability of no change at 89.5%, ahead of the Fed’s final policy decision before the midterms on Wednesday.
