Consumer sentiment fell to the second-lowest reading on record for October, leaving Republicans little time to reverse a major liability in terms of voters’ negative perceptions of the economy before the midterm elections.
Consumer sentiment fell to 46.3, down from 48.1 in September, according to a preliminary reading of the University of Michigan Consumer Sentiment Index for October. In the history of the gauge, sentiment was only lower in May.
The reading underlines that, although economic growth and employment rates have been healthy, consumers are extremely frustrated with the high costs of goods and services, especially with elevated gas prices.
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While sentiment ticked up slightly among Democrats and Republicans, that was offset by declines in sentiment from independent voters, according to survey director Joanne Hsu.
“Overall, sentiment for lower-income consumers and those with smaller stock portfolios dropped steeply this month, groups that have fewer resources to weather increases in prices,” she said. “Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year.”
Years of high inflation have taken a toll on families, and affordability concerns are top of the list for voters.
Inflation, tracked by the most closely watched consumer price index, was 3.4% for the year ending in August. That is well above the 2% rate that the Federal Reserve considers to be healthy. And inflation expectations still remain elevated.
Year-ahead inflation expectations rose from 4.6% last month to 4.7% in October, according to the sentiment survey. Long-run inflation expectations also increased from 3.4% in September to 3.5%.
Inflation expectations have risen greatly since the war with Iran began earlier this year.
Some economists also fear that such sentiment could turn out to be self-fulfilling. If people expect that inflation is going to get worse, they could start acting and spending differently than they would have otherwise.
Consumer sentiment has detached from the underlying health of the economy.
Even though consumers say they are unhappy, they have been spending relatively freely, helping to prop up economic output, which has also been aided by the boom in investment related to artificial intelligence.
THE DETAILS OF SEPTEMBER’S JOBS REPORT ARE MORE ENCOURAGING
And the jobs market is strong. Employers are adding more than enough jobs to keep the unemployment rate trending down, and new claims for unemployment benefits are running at historically low levels.
Nevertheless, terrible economic sentiment has driven down President Donald Trump’s approval ratings and now presents a major threat to the Republican Party in the November elections.
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[ H/T Washington Examiner ]
