Consumer confidence in the United States took a hit in October, reversing recent gains, as Americans voiced frustration over persistent high prices.
The University of Michigan’s consumer sentiment survey, a closely watched indicator of economic outlook, showed a significant drop in Americans’ confidence in the economy for October. After two months of slight improvements, the survey revealed that frustration over high prices was to blame for the decline.
According to the preliminary consumer sentiment reading released on Oct. 11, the index stood at 68.9 for October, down from September’s final reading of 70.1. This 1.2-point decrease was below market expectations of 70.8.
Despite the decline in consumer confidence for October, the sentiment reading remains well above the record low of 50 recorded in June 2022 when inflation spiked to a multi-decade high of 9 percent.
Inflation was once again cited as the main reason behind the drop in consumer confidence in October, as per Joanne Hsu, the Director of Surveys of Consumers at the University of Michigan.
While consumers expressed frustration over high prices, they also showed a more positive outlook on long-run business conditions, which reached a six-month high. However, views on current and expected personal finances slightly softened.
Consumers anticipate a 2.9 percent increase in prices over the next 12 months, up from the 2.7 percent expected in September. Long-term inflation expectations for the next 5-10 years dipped slightly from 3.1 percent in September to 3 percent in October.
Despite concerns over their finances, consumers have continued spending, aiding the U.S. economy. The Federal Reserve Bank of Atlanta’s real-time GDP estimate, updated on Oct. 9, indicated a healthy 3.2 percent expansion in the third quarter.
Additional inflation-related data released on Oct. 11 showed that business input cost inflation and underlying inflationary pressures exceeded expectations. Wholesale inflation, as measured by the Producer Price Index (PPI), rose 1.8 percent annually in September, with the core PPI increasing by 2.8 percent.
These values surpassed market forecasts, signaling that inflationary pressures persist despite progress made since headline PPI reached 11.6 percent in March 2022 and core wholesale inflation hit 9.7 percent that same month.
Jeffrey Tucker, founder and president of the Brownstone Institute, warned in a recent op-ed for The Epoch Times that the increasing money supply, rising prices, and the Fed’s decision to cut interest rates could fuel inflationary pressures.
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