UMich October preliminary consumer sentiment 46.3, missing 47.8 forecast

• The previous survey logged 48.1
• Current conditions came in at 44.7, against an expected 51.0
• Expectations registered 47.3, compared with a 45.5 forecast
• One-year inflation expectations advanced to 4.7%, up from the prior 4.6%
• Five-year inflation expectations rose to 3.5%, from 3.4% previously

In the previous cycle, this report was a genuine market catalyst and misled the Federal Reserve into raising rates, but it has become increasingly unreliable. Today it reads more as a barometer of the US political mood than anything else. Even so, the inflation expectations numbers are still worth monitoring, even if they mostly just track gasoline prices.

For whatever it is worth, that constitutes the lowest result in a period spanning at least 50 years.

As background, the University of Michigan's Surveys of Consumers is among the most enduring measures of American household sentiment. Its history stretches back to the late 1940s. The overall sentiment index is derived from two subcomponents: current conditions and consumer expectations. Every month, a preliminary estimate is released near the middle of the month, with a final figure arriving two weeks thereafter. In 2024, the survey transitioned to a fully online format, a factor that helps account for readings running below those of the pre-pandemic years.

Beyond the headline index, the inflation outlook figures receive substantial attention from both the Federal Reserve and financial markets. The survey covers one-year and five-year expectation horizons.

The year so far has been turbulent. In May, the sentiment index touched an all-time trough of 44.8, pressured by elevated prices, supply interruptions in the Strait of Hormuz and geopolitical tensions. It recovered for two months, reaching 55.2 in July, before sliding once more.

September's final reading of 48.1 was revised upward from an initial 47.8, yet remained below August's 51.7. That represented a second consecutive monthly setback and the weakest showing in four months. The current conditions sub-index fell to 50.9, while consumers voiced more pessimistic assessments of their personal finances and heightened concerns over inflation. Compared with February, prior to the onset of the Iran conflict, sentiment has dropped 16%, with the decline spanning all political affiliations.

The final October report will be published on October 23.