U-Mich October Final: 48.0 — Second-Lowest on Record — Independents' Sentiment Craters to 42.4 as Year-Ahead Inflation Expectations Rise Again to 4.7%
Update (Oct 23, final October release): The final October reading came in at 48.0, down a tenth from September's 48.1 — the second-lowest reading on record after May's all-time low of 44.8, set shortly after the Iran war began. (The final revised up from the 46.3 prelim, which consensus expected to hold — so the story is sideways-at-record-lows, not a fresh collapse.) Joanne Hsu, Surveys of Consumers director: "Purchasing power continues to dominate consumer views of the economy… Sentiment is now 10% below a year ago and 15% less than February, just prior to the Iran conflict."
The political split is the new information: independents' sentiment dropped to 42.4 from 47.7 (May's record low: 40.6) while Democrats' and Republicans' scores improved. Since January, the share of independents citing high prices as a drag on their finances rose 27% — and 52% among Republicans (Democrats: +15%). Reuters pairs this with its Reuters/Ipsos poll showing Trump's approval at a record-low 31% ten days before a Nov 3 midterm election "centering on affordability issues," with Republicans likely to lose the House and possibly the Senate.
Inflation expectations rose again: one-year to 4.7% (from 4.6% in September; 3.4% in February before the war); five-year to 3.5% (from 3.4%). Hsu's framework note is the sharpest warning yet for the Fed: "Consumers broadly expect inflation to accelerate, and this year's increases in inflation expectations are not limited to one part of the political spectrum… If part of consumption currently reflects precautionary spending to avoid future price hikes, disinflation may be even more difficult to achieve."
What it means
The last consumer read before the midterms shows a public that has stopped deteriorating only because it is already at the floor — with expectations still drifting up across party lines. Combined with the Conference Board's 2014-low reading (Consumer Confidence Sinks to 81.9 — Lowest Since 2014 — as More Americans Call Their Finances "Bad" Than "Good" for the First Time in the Survey's History), household perception is at historic lows even as the business surveys boom (October Flash PMIs: Q4 Opens With a Boom — Composite 57.6, Output Prices Highest Since August 2022 (59.8), Delivery Times at a 4-Year Low) — a divergence driven by the pump (Hormuz Watch (Oct 23): Brent Settles $116.72 (+3.1%) — Third Straight Weekly Gain, Highest of the Shock — as US/Israel Reportedly Draw Up Post-Midterm Strike Plans and Kloza Warns of '$5 Gas' Across the Midwest). Hsu's un-anchoring and precautionary-spending warnings are exactly the "reason for caution" the December-hike camp cites (Into the Blackout: October Hold Priced ~83-92% but the Hike Case Is Alive — BofA Sticks With October (Core PCE to 3.4% by Year-End), Oxford Says 'October Is a Live Meeting,' Harris Calls It 50-50).