US consumer sentiment has experienced a notable decline this month, reflecting ongoing concerns over inflation and economic conditions. The preliminary results from the University of Michigan's Surveys of Consumers indicate that the main sentiment gauge dropped to 68.9 in October, a decrease from 70.1 last month.
This outcome significantly diverged from the consensus estimate of 71, as compiled by Bloomberg. However, it's worth noting that on an annual basis, sentiment has risen by 8%, signaling a complex economic landscape. Despite a rise in overall sentiment during the preceding two months, consumers are still expressing frustration regarding persistent high prices.
Joanne Hsu, Director of Surveys of Consumers, highlights this sentiment, stating, "Still, long-run business conditions lifted to their highest reading in six months, while current and expected personal finances both softened slightly." The index for current economic conditions saw a sequential decline of 0.9%, landing at 62.7 in October.
Meanwhile, the expectations measure experienced a reduction of 2%, settling at 72.9, according to the survey results. Interestingly, few consumers have correlated recent geopolitical tensions in the Middle East and Ukraine with the US economy. Hsu pointed out that although concerns have increased this month regarding these conflicts, they were cited spontaneously by less than 5% of consumers. In terms of inflation expectations, the outlook for the coming year has risen to 2.9%, up from 2.7% in September.
Conversely, the five-year price growth outlook has eased slightly to 3% from the prior 3.1%, as revealed by the survey. Furthermore, recent data from the Bureau of Labor Statistics showcased that US consumer inflation surged at a rate that exceeded expectations in September, both on a sequential and annual basis, further complicating the economic narrative. As the US presidential elections approach, scheduled for November 5, the political landscape may influence consumer sentiment significantly.
Hsu notes, "With the upcoming election on the horizon, some consumers appear to be withholding judgment about the longer-term trajectory of the economy." Investors and market analysts should closely monitor these trends as they work to navigate the challenges and opportunities presented by the current economic climate..