US consumer sentiment sours in October; dollar helping inflation fight
By Lucia Mutikani
WASHINGTON (Reuters) — U.S. consumer sentiment deteriorated in October, with households expecting higher inflation over the next year, but labor market strength was likely to continue supporting consumer spending.
The third straight monthly decline in sentiment reported by the University of Michigan on Friday was nearly across all demographic groups. Consumers' 12-month inflation expectations increased to a five-month high.
«While consumers continue to spend, confidence measures are signaling caution, even as job growth remains positive and incomes are rising as price pressures gradually ease,» said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains New York.
The University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 63.0 this month compared to 68.1 in September. Economists polled by Reuters had forecast a preliminary reading of 67.2.
The survey's reading of one-year inflation expectations increased to 3.8% this month from 3.2% in September. This was the highest reading since May 2023 and remained well above the 2.3-3.0% range seen in the two years prior to the pandemic.
The five-year inflation outlook rose to 3.0% from 2.8% in the prior month, staying within the narrow 2.9-3.1% range for 25 of the last 27 months.
«This is not the stuff that the Federal Reserve wants to see,» said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
But the news on inflation was not all downbeat. A separate report from the Labor Department on Friday showed import prices increased less than expected in September as a strong dollar depressed prices of non-petroleum products, which over time will help to lower domestic inflation.
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