US consumer confidence drops to a five-month low as inflation fears mount

The University of Michigan’s consumer sentiment survey, overseen by its director Joanne Hsu, put the US mood at a five-month low in early October. Inflation and high prices remained foremost for consumers across the country.

The university’s Index of Consumer Sentiment fell to 53.6, from 55.1 in September. The index has declined 24 percent over the past year.

The fall was steepest among lower-income consumers and people with smaller stock portfolios. Lower-income households saw a larger loss of confidence than higher-income consumers.

The survey measures how households view current economic conditions and their near-term prospects. Those views can shape spending decisions, an important gauge of the wider economy.

Its measures of both the present and the future deteriorated. The Current Economic Conditions Index fell by three percent since September, while the Index of Consumer Expectations dipped 2.7 percent. The current-conditions measure is down nearly ten percent over the year, and expectations are down over thirty percent.

The current conditions index fell to 44.7 from 50.9 last month, its lowest reading on record. Overall sentiment is among the weakest readings on record, with only one month during the peak of the recent inflation wave recording a lower result.

Inflation expectations also moved higher. Year-ahead expectations rose to 4.6 percent and long-run expectations increased to 3.9 percent, with both short- and long-term measures at their highest levels since May. Consumers said they expected prices to rise 4.7% over the next year.

Confidence increased among Democratic and Republican supporters, though the gains were offset by a decline among independents. The increase in long-run inflation expectations was driven mainly by independents and Republicans. Consumers across the political spectrum said the outlook had weakened compared with earlier this year.

Frustration with the economy is mounting among US consumers as the unemployment rate has risen slightly to 4.4 percent. Whether confidence recovers, inflation expectations settle or household spending weakens further remains unknown.