US consumer sentiment unexpectedly fell for the first time in three months as lingering frustration with the high cost of living offset a more upbeat outlook for the labor market.
The preliminary sentiment index for October fell to 68.9 from 70.1 in September, according to the University of Michigan. The average estimate in a Bloomberg survey of economists called for a reading of 71.
Consumers expect prices to rise 2.9% next year, up from September’s forecast of 2.7% and the first rise in five months, a report published on Friday showed. At the same time, they see that costs will increase by 3% in the next five to 10 years, down from 3.1% in the previous month.
Although the rate of inflation has cooled over the past year, families remain concerned about high prices, which they see outpacing income gains in the coming year as well. A measure of consumers’ perception of their current financial situation has fallen to its lowest level since late 2022.
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The proportion of consumers who expect unemployment to rise next year fell to 31%, the lowest reading in 10 months.
“Despite strong labor markets, high prices and inflation remain on consumers’ minds,” Joanne Hsu, director of the survey, said in a statement.
Separate figures on Friday showed no change in the gauge of prices paid to producers in September, suggesting further progress towards taming inflation.
Still, respondents welcomed the Federal Reserve’s decision last month to begin lowering borrowing costs. Purchase terms for durable goods such as cars and major appliances rose to a four-month high.
Looking at home buying conditions, concerns about high interest rates fell to a 15-month low. But the majority still see borrowing costs as too high, suggesting that easing is necessary to boost sales, the report suggests.
The current conditions gauge dropped to 62.7 from 63.3. A measure of hope fell to 72.9 this month from 74.4 in September.
