Consumer Sentiment Sinks to 46.3 as Cost-of-Living Anger Deepens

A gauge stuck near the floor

The University of Michigan's consumer sentiment index slipped again in October. The preliminary reading came in at 46.3, down from 48.1 in September and 13.6% below its level a year earlier.1 Its current-conditions component fell harder, dropping 12.2% to 44.7. The expectations index moved the other way, rising 2.2% to 47.3.1 Wall Street had expected a weak number but not this weak. Forecasts ranged from Reuters' 47.8 to a consensus of 47.6 compiled elsewhere, and the headline came in below all of them.289

The final October figure is due October 23. Prediction-market traders were roughly split on whether it would land a little above or a little below 46.66 Even before that release, the direction was clear. October was the third monthly decline in a row and left the index near the record low of 44.8 set in May.285 CNN counted five of the weakest readings in the survey's 74-year history in 2026 alone. That puts Americans' mood below where it stood during the 1970s oil crisis, the Great Recession and the pandemic.29

Prices, not paychecks, are the complaint

Survey director Joanne Hsu blamed mounting frustration over the cost of living. She said people across the political spectrum believe the economy has lost ground since January.1 Year-ahead inflation expectations rose to 4.7% from 4.6%, well above the 3.4% recorded in February before the Iran conflict began. Long-run expectations climbed to 3.5%, above their 2024 range of 2.8% to 3.2%.1 Both measures have now risen two months running, reaching their highest levels since May.1

The damage was concentrated. Lower-income households and people with smaller stock portfolios saw sentiment fall steeply, which Hsu tied to their limited cushion against rising prices.1 Buying conditions for durable goods dropped sharply under the weight of high prices and borrowing costs.1 Hsu has also pointed to the gap between wages and inflation. The share of consumers expecting their pay to outpace prices fell from 18% about a year and a half ago to 11% in September, a drop she called huge.33

The Conference Board's index, which leans more toward jobs, tells a similar story. It fell 6.7 points to 81.9 in September, far short of the 89.2 forecast and its lowest level since 2014.1112 For the first time since the board began asking the question four years ago, more respondents called their personal finances bad than good.12 Write-in mentions of high prices, especially for oil and gas, hit new highs.13 The median 12-month inflation expectation in that survey rose to 5.1%.14 The New York Fed's consumer survey put year-ahead expectations at 3.9%, its highest in more than three years.22 The levels differ from one survey to the next, but all three are moving up together.

The grocery paradox

This is where the coverage splits. Late in September, Yahoo Finance tied falling sentiment to higher grocery and gas prices and reported that grocery costs kept climbing sharply through August and early September.21 The official data show something else. The September consumer price index had food-at-home prices down 0.1% for the month and up just 1.8% from a year earlier. Gasoline, by contrast, jumped 9.1% and accounted for more than half of the month's overall increase.41 Grocery inflation actually cooled from 2.2% in August.50 Purdue's agricultural economists put it bluntly: energy costs are pushing up energy prices, not grocery prices. Packaged goods, where fuel costs would show up first, were flat or falling.48

The main driver is the pump. Gasoline prices have risen by more than $1.50 a gallon since the war began.21 By early October the national average was about $4.37.29 Energy prices are up 20.4% over the past year, and headline inflation reached 3.7% in September.41

That said, grocery anger is not imaginary. The national index hides real increases in items people buy often. Rice and coffee are each up about 7% from a year ago. Fresh fruit is up nearly 5%, and lettuce rose 3.9% in September alone. Milk and eggs got cheaper.47 Restaurant prices are rising almost twice as fast as grocery prices, up 3.5% over the year.50 What hurts most is the cumulative climb. In Michigan, CBS reported grocery prices up more than 4% over two years, even though shoppers had been promised lower bills.33 Consumers also expect more to come, with food price forecasts above 5% for the next year.24

Our reading is that the grocery complaint is mostly about the level of prices, not the current rate of increase. It is amplified by fuel costs eating into the same household budget. A 1.8% annual rise is mild by historical standards. It still lands on top of five years of above-target inflation. CNBC counted about 65 straight months of annual CPI readings above 2%, the longest such streak this century.22

How shoppers are adapting

People who say they feel broke are still spending, at least overall. Card spending per household was reported up 6.2% from a year earlier even as the Conference Board index fell.20 Deloitte found discretionary spending intentions rising for a second month to their strongest reading since January. In the same survey, 71% of respondents expected grocery prices to keep rising.30

The explanation most coverage settles on is the K-shaped economy. Higher-income households, helped by stock gains, are carrying consumer spending while budgets lower down are stretched.35 A separate Michigan report found 54% of consumers plan to cut back next year on items whose prices have jumped, and 16% plan to stop buying them altogether. Higher earners were more likely to keep spending as usual.35 ING's James Knightley warned that a stock-market correction, combined with strain elsewhere, could undermine the growth story.29

In grocery stores, the strain shows up in how people shop more than in how much they spend. In an Axonify survey of more than 1,200 shoppers, 88% said they use more than one grocery store a month. Of those, 69% said they shop around for better prices. Forty-two percent said they have cut visits to their usual store.26 Cleveland Fed President Beth Hammack has described something worse than trading down. She said some residents are "choosing" between groceries and essential bills.22

What the Fed and voters will read into it

The Federal Reserve raised its benchmark rate by a quarter point in September to a range of 3.75% to 4.00%. It was the first hike in three years, and economists expect another in December.28 Rising long-run expectations matter most to policymakers. Hammack said she does not take anchored expectations for granted. She warned that each month of high inflation raises the risk of an inflationary mindset taking hold.22 That leaves the Fed in a bind. Rate hikes fight inflation psychology, but they also make durable goods harder to afford, and buying conditions for those goods just collapsed.

There is also a statistical caveat. The university says the headline index needs to move 4.8 points for a monthly change to be statistically significant. October's 1.8-point drop does not meet that bar. The 6.2-point fall in current conditions narrowly clears the threshold for that component.7 Outlets also disagree on how to describe the 44.7 reading. Reuters and CNN called it an all-time low.3529 Another analysis described it as a post-Covid low that barely broke May's floor.36 Either way, the more important point is that sentiment has stayed in this range for months.

The partisan pattern is changing as well. In October, sentiment rose among Democrats and Republicans but fell enough among independents to outweigh both.1 One analysis put independents' decline since January at 23%, compared with 14% for Republicans and 9% for Democrats.36 With the midterms on November 3, those swing voters are the group whose economic mood is worsening fastest.28

The bottom line

The October survey reflects frustration more than fear of collapse. Expectations edged up, the labor market is holding, and wealthier households keep spending. Still, the main ingredients of discontent are firmly in place. Fuel prices are high, five years of rising prices have added up, wages are falling behind, and inflation expectations are drifting upward. Grocery inflation has cooled on paper, but that has done little for shoppers who are still paying far more than a few years ago. Unless gasoline prices come down, a better mood looks unlikely before November.