University of Michigan Reports Final Results of Its Consumer Sentiment Index for October

The University of Michigan today (10-28-22) released the final results of its Consumer Sentiment Index (CSI) for October. The Index of Consumer Sentiment increased to a reading of 59.9 in October, up from its reading of 58.6 in September. This is a month-over-month increase of 2.2% but down 16.5% year-over-year (71.7 in October 2021).

The Current Economic Conditions increased to a reading of 65.6 in October, up from its reading of 59.7 in September. This is a month-over-month increase of 9.9% but down 15.6% year-over-year (77.7 in October 2021).

The Index of Consumer Expectations declined to a reading of 56.2 in October, down from its 58.0 reading in September. This is a month-over-month decrease of 3.1% and down 17.2% year-over-year (67.9 in October 2021).

In remarks and analysis prepared to accompany the release of the October Consumer Sentiment Index, Dr. Joanne Hsu, Director of Surveys for the University of Michigan, said:

“Consumer sentiment confirmed the preliminary reading earlier this month, inching up just 1.3 index points from September. With sentiment sitting only 10 index points above the all-time low reached in June, the recent news of a slowdown in consumer spending in the third quarter comes as no surprise. This month, buying conditions for durables surged 23% on the basis of easing prices and supply constraints. However, year-ahead expected business conditions worsened 19%. These divergent patterns reflect substantial uncertainty over inflation, policy responses, and developments worldwide, and consumer views are consistent with a recession ahead in the economy. While lower-income consumers reported sizable gains in overall sentiment, consumers with considerable stock market and housing wealth exhibited notable declines in sentiment, weighed down by tumult in those markets. Given consumers’ ongoing unease over the economy, most notably this month among higher-income consumers, any continued weakening in incomes or wealth could lead to further pullbacks in spending that would reinforce other risks of recession.

The median expected year-ahead inflation rate rose to 5.0%, with increases reported across age, income, and education. Last month, long run inflation expectations fell below the narrow 2.9–3.1% range for the first time since July 2021, but since then expectations have reverted to 2.9%. Uncertainty over inflation expectations remains elevated, indicating that inflation expectations are likely to remain unstable in the months ahead.”