Consumer Sentiment Holds Near Record Low at 48 as Prices Bite

A revision that changes little

The final October reading of the University of Michigan's consumer sentiment index came in better than the preliminary estimate. Even so, it shows American households close to the gloomiest level the survey has ever recorded. The index finished the month at 48.0. That is barely below September's 48.1 and well above the preliminary 46.3 that economists had expected to stand.2515 Bloomberg reported that the final number beat every estimate in its survey of economists. It also described the result as a five-month low, driven by high prices and rising interest rates.

Some market commentary treated the upward revision as a positive surprise and a possible support for the dollar.26 The more important number is where the index sits. October's 48.0 is the second-lowest reading in the survey's history. Only May's 44.8 was lower, recorded shortly after the war with Iran began.2529 Surveys of Consumers director Joanne Hsu said purchasing power "continues to dominate consumer views of the economy." She noted that sentiment is now 10% lower than a year ago and 15% lower than in February, just before the conflict started.25

Households were not in a state of collapse in October. They were stuck, and the revision did not change that.

Today feels worse than tomorrow

The two halves of the index moved in opposite directions. The current conditions gauge fell 8.3% from September to 46.7. The main cause was an 18% drop in how consumers rate buying conditions for durable goods, which Hsu tied to borrowing costs and affordability.26 At the preliminary stage, that component had dropped to 44.7. Trading Economics called that an all-time low.21 Other analysts described it more cautiously as a post-pandemic low that only just broke May's floor.19

The expectations index rose 5.4% to 48.8, though it is still about 3% below its level of a year earlier.26 One commentator argued that this split shows people who feel squeezed now but have not given up on the future.19 That is a fair reading. It also matters for retailers: consumers are not necessarily bracing for a recession, but they are reluctant to commit money today.

The gap between groups is just as telling. In the preliminary data, the steepest declines in confidence came from lower-income households and those with small stock holdings, the groups least able to absorb higher prices.2223 In the final report, households with little or no stock market exposure cited high prices as a drag on their finances more often than they did at the start of the year. The stock market had been rising on enthusiasm for AI investment until recently.25 The result looks like an economy split in two, with wealthier households still spending and others pulling back.

Groceries: price relief that shoppers don't feel

The coverage diverges most on grocery prices. Al Jazeera's account of the October survey linked the drop in sentiment to tensions with Iran pushing up prices at both the grocery store and the gas pump.29 Yahoo Finance's report on September also named higher grocery and gas prices as the forces weighing on how Americans see the economy.2

The official data tells a more complicated story. September's Consumer Price Index showed food-at-home prices up just 1.8% from a year earlier and down 0.1% from August. Dairy fell 0.7% over the year, and meat, poultry, fish and eggs combined rose only 0.3%.5 CNN called grocery prices a "silver lining" in the report but warned that economists expect sharply higher diesel costs to push food prices up again.6 Diesel hit a record $6.53 a gallon on September 22 and has since stayed around $6.28. Diesel moves almost every grocery item from farm to shelf.7

Three explanations stand out for why shoppers still feel worse off despite slowing grocery inflation. The first is that prices have built up over time. Grocery prices are more than 20% higher than five years ago, according to Bureau of Labor Statistics data cited by ABC News.4 Food prices also rose 4% since November 2024, on top of a 23% jump over the prior four years.7 EY-Parthenon's Gregory Daco said shoppers remember what groceries cost before the pandemic and feel a fresh shock at each visit. In his view, the visibility of prices is what keeps morale low.7

The second is shrinkflation. Food-industry analyst Phil Lempert argues that the CPI tracks package prices well but misses products shrinking. He cites a University of Massachusetts Amherst study that found packaged foods shrank 14.6% on average between 2012 and 2019.5 Candy and gum prices were also up 8.1% from a year earlier in August, more than four times the rate for groceries overall. That is the kind of increase shoppers remember.5

The third is that grocery bills are being squeezed by other costs. Overall inflation rose to 3.7% in September, mostly because of energy. Core prices also ran hotter than expected.65 Heather Long, chief economist at Navy Federal Credit Union, set that 3.7% against typical wage growth of about 3%. She said many households cut back at the grocery store first by switching to store brands and buying less meat.6 In other words, grocery inflation has eased, but groceries are still where many families make room for gas, rent and debt payments.

How retailers and shoppers are adjusting

Grocers have noticed. Aldi has cut prices on nearly a third of what it sells in a fall promotion that runs through at least November 3. Walmart said it would lower prices on about 11,000 more items, funded partly by $2.9 billion in tariff refunds.5 Lempert argues that these cuts are real but selective. They focus on staples shoppers remember, while the rest of the cart stays at full price.5

Shoppers are also changing how they buy. Research from FMI, the food industry association, found that 86% of consumers say loyalty programs matter to them and 59% use them regularly. About half use their rewards while planning grocery trips.9 An Axonify survey found that nine in ten shoppers believe grocery prices have risen over the past year. Three in five said a poor in-store experience feels especially frustrating in the current economy.10 Ahead of the holidays, Circana found the average American expects to spend $779, down from $796 last year, and 74% plan to use savings strategies such as promotions and store brands.22

The outlook for food prices is not reassuring. Cal Poly economist Ricky Volpe warned that the fourth quarter of 2026 could be the most inflationary period of the year.9

Other surveys agree, and inflation expectations are rising

Michigan's index is not alone. The LSEG/Ipsos Primary Consumer Sentiment Index for October fell 5.3 points to 45.2, its lowest reading since October 2011 and below its May 2020 pandemic low.28 The Conference Board's index dropped 6.7 points to 81.9 in September, with concerns about fuel prices rising.13 The surveys differ in method, but they point the same way.

The more important figure for policymakers may be inflation expectations. One-year expectations rose to 4.7% from 4.6%, compared with 3.4% in February. Five-year expectations rose to 3.5%, up from 3.2% in March.25 Hsu warned that if some current spending is people buying ahead to avoid future price increases, bringing inflation down could be harder still.25 Analysts at Finimize argued that the 3.5% long-run figure may matter more to markets than the headline index.18

That puts the Federal Reserve in a difficult position. It raised rates by 25 basis points in September, and markets widely expect it to hold at 3.75–4.00% at its meeting next week.29 Fed Chair Kevin Warsh has said inflation "is too high and has been for too long."1

Mood versus spending, and the election

A caution runs through the coverage: weak sentiment does not automatically mean weaker spending. The Michigan survey measures how people feel, not what they actually buy.23 Some analysts point out that the preliminary October drop in the headline index was smaller than the university's own threshold for a statistically significant monthly change.16 Spending has held up so far, supported largely by higher-income households.22 The labor market also does not appear to be the main worry, since New York Fed data showed job-loss fears easing slightly.2213

The politics are harder to ignore. Sentiment among independents fell to 42.4 from 47.7, just above May's record low of 40.6, while sentiment among Democrats and Republicans improved.25 Since January, the share of Republicans saying inflation is hurting their finances has risen 52%, compared with 27% for independents.29 With the midterms on November 3, the October survey is the last reading before voters decide.14

Our reading is that October's revision eased the worst fears but did not change the trend. Grocery prices have flattened on paper, but after years of cumulative increases, high fuel costs and rising inflation expectations, shoppers do not feel any relief. Until diesel and gas prices fall and price cuts reach beyond the staples, a sentiment index stuck in the 40s is an accurate picture of household finances.