US Consumer Confidence at 48 in October, Above Expectations Despite Slight Decline
Key Facts
The University of Michigan consumer sentiment index registered 48 points in the final October reading, compared with 48.1 in September and expectations of 46.3, according to data recorded by EL7. The reading was above recorded expectations but edged down from the previous month. The data do not support describing October’s reading as the lowest in five months; the index stood at 44.8 points in May, the lowest previous level cited. Reuters reported that October’s reading was the second-lowest in the index’s history, after May’s trough. The overall index’s stability near its previous levels masks a divergence between its components, as current conditions weakened while expectations improved.
Joanne Hsu, director of the surveys, said purchasing power dominates consumers’ outlook, adding that sentiment is 10% below its level a year ago and 15% below its level in February. This reflects continued weakness in households’ overall outlook despite the improvement in the expectations component in October. On current conditions, Hsu said the decline came entirely from a deterioration in buying conditions for durable goods. The University of Michigan linked this deterioration to higher interest rates and affordability concerns. The pressures cited in the survey were therefore concentrated in the cost of buying durable goods, rather than the decline in the current conditions component being spread across multiple causes.
The survey’s inflation expectations showed an increase over the longer term, with expectations for the next five years rising to 3.5% in October from 3.4% in September, according to Reuters. This is a measure of households’ expectations for prices over the coming years, not a measure of realized inflation. In separate data, the Bureau of Labor Statistics said the consumer price index rose 0.6% in September and 3.7% over 12 months. The gasoline index also rose 9.1% during the month, accounting for more than half of the monthly increase in the overall price index. These figures put the rise in households’ expectations in the context of the recorded increase in consumer and fuel prices during September.
Sentiment diverged by political affiliation, with independents’ reading falling to 42.4 points in October from 47.7 in September, according to Reuters. By contrast, readings for Democrats and Republicans improved, though the report did not provide figures for either group. This disparity adds another dimension to the picture painted by the overall index, as not all groups moved in the same direction. Hsu said purchasing power is the issue that dominates consumers’ outlook. Sentiment also remained below year-ago and February levels, underscoring the size of the gap from the two levels cited in the survey.
In markets, the S&P 500 fell 0.4% during the October 23 session, while Brent crude rose 2.8% to $111.69 a barrel at the time of the Associated Press report. The agency linked the decline in stocks to pressure from rising oil prices. The market moves came on the same day the October consumer confidence reading was released. The available facts do not link the stock move directly to the survey result. The confidence reading therefore remains an indicator of households’ assessment of conditions and prices, while the agency’s report describes the session’s moves in stocks and oil.
Attention now turns to the Federal Open Market Committee meeting on October 27 and 28, with a news conference scheduled for October 28, according to the Federal Reserve calendar. The Bureau of Economic Analysis also says it will release its September personal income and outlays report on October 29, including spending data and the personal consumption expenditures price index. The index’s latest available annual reading was 3.4% in August, according to the bureau’s page. The upcoming release will allow price and spending data to be tracked alongside updates from the central bank meeting. Both dates follow the rise in five-year inflation expectations in the October survey, while the available facts do not specify the meeting’s outcome or the direction of upcoming data.