Consumer sentiment fell back about 6% this October after inching down slightly for two consecutive months, according to the University of Michigan Surveys of Consumers.

One-year expected business conditions plunged 16% and expectations over consumers’ own personal finances in the year ahead fell 8%, reflecting ongoing concerns about inflation and, to a lesser degree, uncertainty over the implications of negative news both domestically and abroad, according to chief economist Joanne Hsu, director of the surveys.

“While consumers recognize that inflation has slowed down from its peak last summer, they cannot ignore that their budgets remain stretched and their purchasing power reduced.” Hsu said. “Given the high-frequency and widespread nature of food and gas purchases across American families, it is no surprise that concerns over the prices of these goods loom particularly large in the minds of consumers. Even so, strength in incomes continues to support aggregate spending for the time being.”

Personal finances weaken as concerns over inflation grow

Growing concerns about inflation underpinned the 8% deterioration in consumers’ assessments of their personal finances in this month. About 47% of consumers reported that high prices are eroding their living standards, up substantially from 39% last month. Consumers spontaneously pointed to prices of groceries and gas. At the same time, consumers are aware that goods and services vary considerably in their price trends, Hsu says.

Spontaneous mentions of high prices for larger purchases like durables and vehicles have been relatively flat this month. While lower income consumers saw little change in their personal finances in recent months, middle- and higher-income consumers have expressed declines since August, reflecting in part recent weakness in stock markets.

Consumer attitudes sour on negative news

The overall index of economic news heard by consumers worsened about 15% between last month and this month, reaching its lowest reading since June 2023. The drumbeat of other negative headlines—war in the Middle East, the just-resolved leadership crisis in the House of Representatives, daily developments with Trump’s legal troubles, among others—has produced its own drag on sentiment as well, Hsu says.

After three months of little change, consumers’ confidence in government economic policies fell 8% to its lowest reading since May when the debt ceiling crisis was at its peak. About 15% of consumers spontaneously mentioned the autoworkers’ strike, up from 10% last month.

Consumer Sentiment Index

The Consumer Sentiment Index fell to 63.8 in the October 2023 survey, down from 67.9 in September and above last October’s 59.9. The Current Index fell to 70.6, down from 71.1 in September and above last October’s 65.6. The Expectations Index fell to 59.3, down from 65.8 in September and above last October’s 56.2.

About the surveys

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 phone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current and Expectations Index, the minimum is 6 points.

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