Michigan’s final October consumer sentiment beats forecasts as inflation expectations rise

The University of Michigan reported on October 23 that its final October consumer sentiment index was 48, above both the preliminary reading and economists’ forecast of 46.3, but slightly below September’s 48.1. The survey measures how US households view their finances and the economy; confidence remains near historic lows.^[1][2]

Consumers’ inflation expectations—the price increases they anticipate—also rose. Coverage of the survey cited high prices and rising interest rates as pressures on household morale.^[1][2]

The upward revision eases some of the pessimism in the preliminary reading, but confidence remains depressed. Households worried about their finances may postpone optional purchases, pushing retailers and other consumer businesses to offer discounts that squeeze margins. Weak sentiment signals that risk; actual spending data will determine whether it is materializing.^[1][2]

Rising inflation expectations also complicate the outlook for businesses counting on lower rates to stimulate demand: if those expectations feed into persistent price increases or wage demands, the Federal Reserve may be more cautious about cutting rates.^[1] On October 23, two-year and ten-year Treasury yields stood at 4.69% and 5.00%, respectively, both up 0.04 percentage points from the previous session; these yields influence business financing and household borrowing costs. The survey alone does not establish that it caused the yield increases.

Impact

What to watch next

• October 27: The Conference Board’s October Consumer Confidence release will show whether another household survey also points to persistently weak confidence.
• October 28: The Fed’s rate decision and press conference will show how policymakers balance weak demand against inflation risks, shaping the outlook for borrowing-cost relief.
• October 29: September personal spending and PCE price data will test whether weak confidence accompanies slower spending and persistent inflation. Core PCE, which excludes food and energy, is forecast to rise 0.3% month over month, up from 0.2%.