Consumer sentiment in the U.S. showed little change in October, despite ongoing worries about the job market and rising prices as a government shutdown began. The University of Michigan’s preliminary survey revealed a sentiment score of 55, a slight improvement from 55.1 in September, although economists had anticipated a drop to 54.2.
The survey pointed out that consumers are primarily focused on financial issues, such as high costs and uncertain job prospects. Interestingly, there wasn’t much indication that the recent shutdown significantly altered consumer perceptions of the economy at this stage.
Expectations for inflation remain notably high, with respondents predicting it will sit at around 4.6% over the next year, slightly down from 4.7% in September. Long-term expectations for inflation, however, remained steady at 3.7%.
Despite the overall sentiment holding steady for now, consumers appeared gloomy about their personal finances and expressed unfavorable views on the current market for durable goods. This sentiment aligns with reports that the labor market has shown signs of slowing down, with job growth nearly flat in the months leading up to August.
As the survey was conducted shortly before the funding lapse on September 30, analysts suggest that further declines in consumer sentiment are likely, especially if the shutdown continues. Oliver Allen, a senior economist, predicted that the final October figures may reflect a more pronounced downturn unless a resolution is quickly reached.
Amid these challenges, the Federal Reserve is still expected to consider further interest rate cuts in their upcoming meeting, despite the ongoing concerns surrounding inflation. The Fed’s recent policy shift to lower rates aims to address signs of weakness in the economy, including the labor market.
As the government shutdown stretches on, Americans remain cautious, and it’s crucial for policymakers to find solutions that can bolster consumer confidence and help restore economic stability.
