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U.S. consumer sentiment held steady in October, though Americans’ concerns about the labor market and inflation persisted as the government shutdown began.
The University of Michigan’s preliminary consumer sentiment survey for October was little changed from last month, coming in at 55 as economists polled by LSEG estimated a more significant decline to 54.2, after the index had a 55.1 reading for September.
Michigan’s Surveys of Consumers said that “pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” adding that interviews with respondents showed little evidence the shutdown “has moved consumers’ views of the economy thus far.”
The survey’s measure of consumer expectations for inflation over the next year fell to a still-high 4.6% this month from 4.7% in September. Consumers’ expectations for inflation over the next five years were unchanged at 3.7%.
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Consumers were pessimistic about future personal finances and their views on current buying conditions for long-lasting manufactured goods were unfavorable.
Before the government data blackout, the labor market had softened, with job growth almost stalling in the three months leading up to August.
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The survey was conducted between Sept. 22 and Oct. 6. Government funding lapsed on Sept. 30. Sentiment declined during previous shutdowns, and economists expect the consumer sentiment data to be downgraded when the final data is published later this month.
“The final Michigan survey for October probably will show a more significant deterioration, unless the shutdown ends very soon,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
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Despite the high inflation expectations, economists say the Federal Reserve would still deliver another interest rate cut at its Oct. 28-29 meeting.
The Fed resumed easing policy in September, cutting its benchmark overnight interest rate by 25-basis-points to the 4.00%-4.25% range amid signs of weakness in the labor market.
Reuters contributed to this report.
