Consumer sentiment dips slightly in October amid concerns over high prices
High prices and inflation remain top of mind for U.S. consumers.
The Consumer Sentiment Index fell to 53.6 in October, a five-month low and down from 55.1 in September and below last October's reading of 70.5, according to the University of Michigan Surveys of Consumers. The index of current conditions fell to 58.6, its lowest since August 2022 and down from 60.4 in September.
“Overall, consumers see few material changes in economic circumstances from last month as inflation and high prices remain at the forefront of consumers' minds,” said economist Joanne Hsu, director of the surveys.
Looking forward, consumers aren’t feeling very positive. The expectations index fell to 50.3, down from 51.7 in September and below last October's 74.1.
High Prices
Consumers remain frustrated by the persistence of high prices, spontaneously mentioning high prices at various points throughout the interviews, noted Hsu.
About 45% of consumers referenced that their personal finances were eroded by high prices, the highest reading since August 2024. Similar concerns arose for big ticket purchases as well.
For large household durables, buying conditions worsened this month as a rising share of consumers negatively referenced prices or tariffs. Buying conditions for vehicles are more than 20% below a year ago, with 39% of consumers citing high prices.
Interest Rates
Consumer views of major purchases have started to incorporate last month's interest rate cut by the Federal Reserve, Hsu said. The share of consumers blaming high interest rates or tight credit for poor buying conditions for homes and cars receded in October.
At the same time, interest rate concerns remain considerably elevated relative to early 2022 and the years prior. Consumers are divided on whether or not further relief with borrowing costs are on the horizon, according to Hsu.
A plurality of consumers, about 42%, expect interest rates to fall in the next year, down from 47% last month and 52% a year ago. About 31% expect rates to hold steady, while just under a quarter of consumers expect rates to increase
About the survey
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web.
