US consumers’ year-ahead inflation expectations rose sharply in early October, driving a steep deterioration in Americans’ views of their finances as well as sentiment.
(Bloomberg) — US consumers’ year-ahead inflation expectations rose sharply in early October, driving a steep deterioration in Americans’ views of their finances as well as sentiment.
Americans expect prices will climb at a 3.8% rate over the next year, the highest in five months and up from the 3.2% expected in September, according to the preliminary October reading from the University of Michigan. They see costs rising 3% over the next five to 10 years, compared to last month’s 2.8%.
The sentiment index slid more than 5 points in October to 63, the sharpest monthly decline since June of last year. The figure fell short of all but one estimate in a Bloomberg survey of economists.
“After stabilizing earlier this year, concerns about inflation have grown again,” Joanne Hsu, director of the survey, said in a statement. “About 49% of consumers reported that high prices are eroding their living standards, up substantially from 39% last month and matching the all-time high last recorded in July 2022.”
The high cost of living across the country continues to depress household sentiment. The last time consumers were this pessimistic about their current finances was when inflation hit a four-decade high of 9.1% in June 2022.
Households were most concerned about high costs of groceries and fuel. Respondents with a high school diploma or less reported a particularly sharp decline in sentiment.
“If these concerns continue to grow, consumer attitudes will keep deteriorating as well,” Hsu said.
Data out Thursday showed consumer prices rose at a brisk pace in September for a second month, reinforcing the Federal Reserve’s intent to keep borrowing costs high to stamp out inflation.
Consumers’ views of the economy’s outlook over the next year also soured, falling 14 points — the most since May 2022 — to 60.
One bright spot, buying conditions for durable goods held steady.
The current conditions gauge dropped to a five-month low of 66.7 from 71.4. A measure of expectations also slumped to the lowest since May.
–With assistance from Jordan Yadoo.
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