UMich ‘Current Conditions’ Sentiment Crashes To Record Low As ‘Independents’ Lose Faith

After sliding back near cycle lows in September (as Republicans lost faith in the recovery and MidEast tensions re-escalated), analysts expected UMich consumer sentiment to fall further in preliminary October data released this morning.

And the analysts were right as The University of Michigan’s preliminary sentiment index decreased to 46.3, the lowest reading since May (below the median estimate of 47.6). However, the current conditions gauge sank to 44.7, the lowest on record, from 50.9 in the previous month, while the expectations index rose to 47.3 from 46.3, the first increase since July.

That is to say that Americans see the Current Conditions in America as worse than at the trough of COVID and the peak of the Great Financial Crisis (except stocks are at record highs this time)…

While year-ahead expectations for personal finances and business conditions crept up slightly, buying conditions for durables plummeted amid high prices and borrowing costs.

Increases in sentiment among Democrats and Republicans were offset by a decline among independents this month.

Year-ahead inflation expectations ticked up from 4.6% last month to 4.7% this month. The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations also stepped up from 3.4% in September to 3.5%,

Overall, sentiment for lower-income consumers and those with smaller stock portfolios dropped steeply this month, groups that have fewer resources to weather increases in prices.

“Frustration over cost-of-living continues to mount,” says UMich Survey Director, Joanne Hsu, adding that “despite their differences, consumers of all political identifications agree that the outlook for the economy has softened since the beginning of the year prior to the Iran conflict.”