US Consumer Sentiment Falls to Five-Month Low in October

US consumer sentiment fell in early October and views of current economic conditions hit an all-time low as inflation weighed on households.

The University of Michigan’s preliminary sentiment index decreased to 46.3, the lowest reading since May, according to the survey released Friday. That was below the median estimate of 47.6 in a Bloomberg survey of economists.

The current conditions gauge sank to 44.7, the lowest on record, from 50.9 in the previous month. The expectations index rose to 47.3 from 46.3, the first increase since July.

Consumer sentiment continued to worsen as gasoline prices remained elevated, borrowing costs rose and hiring slowed.

Consumers expect prices to rise 4.7% over the next year, up slightly from 4.6% in the previous month. They also saw costs rising at an annual rate of 3.5% over the next five to 10 years, slightly more than what consumers estimated in September.

Higher fuel prices are weighing on consumers already frustrated with persistent inflation and the rising cost of living. In recent months, overall price increases have been outpacing pay gains, further pressuring household budgets.

Sentiment of lower-income consumers and those with smaller stock portfolios dropped steeply this month, Joanne Hsu, director of the survey, said in a statement. And increases in sentiment among Democrats and Republicans were offset by a decline among independents.

“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,” Hsu said.

While consumer sentiment has been historically weak much of this year, spending has remained healthy. A stable labor market and buoyant stock market are supporting outlays on a wide range of goods and services.

Consumers’ perception of their current financial situation held steady this month, though their view of buying conditions for durable goods fell to a record low due to concerns over higher prices and interest rates.

The survey period includes responses from Sept. 22 to Oct. 5.

A special report on consumers’ response to higher gasoline prices released Friday found only about 31% expect to spend as usual over the coming year. Just over half said they would cut back spending on items such as households goods, cars, dining out and vacations.