The final University of Michigan Consumer Sentiment Index for October rose month over month from a final September reading of 93.2 to 95.5, an increase of 2.5%. Economists polled by Bloomberg were expecting a final October reading of 96.0.
The final index reading in October of last year was 98.6. The recent favorable job and income trends were partially offset with lower willingness to purchase homes and vehicles. The lack of spending on big-ticket items has weighed on the size of decade-long economic expansion.
The survey’s chief economist, Richard Curtin, commented:
Earlier in the expansion, dismal growth in income and job prospects were matched with record favorable references to prices and interest rates on homes and vehicles. Later in the expansion, favorable income and job prospects were matched with the fewest favorable references to prices and interest rates in decades; they have become the expected norm and no longer spark significant gains in spending.
Curtin continued:
On the plus side, the mismatch has kept consumer indebtedness (aside from education loans) at manageable levels, and positive finances have recently buoyed spending so as to ensure the continuation of the expansion.”
Commenting on spontaneous references to economic conditions, Curtin noted:
The most spontaneous references were to the negative impact of tariffs, which fell to 27% in October from last month’s 36%; the impeachment inquiry totaled just 2% in October, less than the 5% who mentioned a negative impact from the GM strike.
The month-over-month consumer expectations subindex rose by 1% from 83.4 to 84.2 (up 1%), and the current conditions subindex increased from 108.5 to 113.2 (up 4.3%).
Year over year, the current conditions subindex ticked higher by 0.1%, and the consumer expectations subindex fell by 5.7%.
Consumers’ outlook for slower but still positive growth is “multiple sources of uncertainty will keep consumers focused on potential threats to their prevailing optimism, with the most critical being threats that could significantly diminish their job and income prospects,” Curtin concluded.
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