Consumers Feel Inflation is Still Haunting Their Pocketbooks

Consumers felt only a little better about the economy in October, even after a summer of blockbuster economic growth and some hopeful signs inflation is easing.

The University of Michigan's Consumer Sentiment Index for the month rose to 63.8, compared to a reading of 63 in September. That's a bit better than the 63 reading economists polled by Dow Jones expected.

The index is down 6% over September's 67.9 print.

"This decline was driven in large part by higher-income consumers and those with sizable stock holdings, consistent with recent weakness in equity markets," said survey director Joanne Hsu.

Consumers also continued to fret inflation, even as it appears to be easing. Year-ahead inflation expectations rose from 3.2% in September to 4.2% in October, the highest reading since May 2023.

A report released Friday from the Commerce Department's Bureau of Economic Analysis showed inflation is on the decline. It showed the core personal consumption expenditures index – an inflation indicator that excludes volatile energy and food prices – slipped to 3.7% in September from 3.9% in August and 4.3% in July.

Consumers reported a perceived 0.7% decline in current economic conditions. from September to October. Additionally, the university's consumer expectations index fell 9.9% decline month-to-month.

Those sentiments follow a quarter that posted 4.9% growth for the U.S. economy, and economic forecasts of a soft landing.

Hsu said the pessimism reflected "ongoing concerns about inflation and, to a lesser degree, uncertainty over the implications of negative news both domestically and abroad."