US consumer sentiment deteriorated considerably in early October.
The preliminary read on the University of Michigan’s gauge matched the lowest estimate from more than four-dozen economists at 63. Consensus wanted 67. The range was 63 to 70.2.
October’s initial result was the worst since May and reflected a “substantial increase in concerns over inflation,” as well as a dramatic decline in perceptions of business conditions for the year ahead.
Both the current conditions and expectations gauges retreated markedly, with the latter dropping 8%.
Survey director Joanne Hsu was keen to note that consumers don’t generally expect the hard times to last. “Long-run expected business conditions are little changed,” she said Friday.
For now, though, inflation concerns are back following a run higher for oil prices. Year-ahead inflation expectations jumped to 3.8% from 3.2% in September. That’s the highest in five months.
As a reminder, the pre-pandemic range (so, “normal”) was 2.3%-3%. October’s MoM increase was the second-largest since inflation took off in early 2021.
Longer-term inflation expectations, which the Fed cares more about, moved higher as well, to 3%, near the upper-end of the post-pandemic range.
Overall, this was a poor read on macro conditions across the world’s largest economy: Sentiment is dour and inflation expectations are up handily. “Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices,” Hsu remarked.
