US Consumer Sentiment Near Record Low as Economic Frustration Grows
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A Walgreens pharmacy stands beneath dark storm clouds, with vehicles parked outside, illustrating the retail environment amid rising prices and borrowing costs. Illustrative image. |
WASHINGTON — October 9, 2026
Consumer confidence in the United States fell further in early October, approaching a record low as rising living costs and higher borrowing expenses increased pressure on household budgets. The decline comes less than a month before the November 3 midterm elections, when voters will decide which party controls Congress.
The University of Michigan's Consumer Sentiment Index dropped to 46.3 in October from 48.1 in September, marking its third consecutive monthly decline. Economists surveyed by Reuters had expected a reading of 47.8, while the latest result brought the index close to its record low reached in May.
The survey's measure of current economic conditions fell more sharply, reaching an all-time low of 44.7 compared with 50.9 the previous month. Consumers' expectations for the future improved slightly, but their willingness to purchase long-lasting goods weakened as prices and borrowing costs remained high.
The worsening mood was particularly evident among lower-income households, people with smaller stock portfolios and respondents who identified as political Independents. Although sentiment improved somewhat among Democrats and Republicans, confidence remained considerably below its level in January.
Rising energy costs linked to the US-Israeli war involving Iran have added to inflation concerns. The conflict has pushed up energy prices, while the Federal Reserve raised its benchmark interest rate in September for the first time in three years, increasing the cost of borrowing.
Jim Baird, chief investment officer at Plante Moran Financial Advisors, said consumers across the political spectrum were frustrated by higher prices and the feeling that their financial situations were not improving. He said these concerns could become especially visible when Americans vote in the coming weeks.
Despite the decline in confidence, economists do not necessarily expect consumer spending to fall sharply. Spending has become less closely linked to sentiment over time, and higher-income households continue to support economic activity, partly because of gains in financial markets.
This divide reflects what economists describe as a K-shaped economy, in which some households remain financially strong while others face growing pressure. Higher-income consumers have generally been better positioned to maintain their spending, while middle- and lower-income households have struggled with rising expenses.
A separate University of Michigan survey found that just under one-third of consumers expected to maintain their usual spending over the next year on products that had experienced substantial price increases. Meanwhile, 54% said they planned to reduce purchases, and about 16% expected to stop buying those products altogether.
US stocks finished higher on Friday, with the Dow Jones Industrial Average gaining 0.8%, while the S&P 500 and Nasdaq Composite each rose by about 0.6%. Economists said continued strength in equity markets could help support spending, particularly among wealthier households.
James Knightley, chief international economist at ING, said spending could remain resilient as long as stock markets held up. He added that lower fuel costs and improving employment prospects could provide relief to households, but a stock market correction could quickly change the outlook.
Inflation expectations also increased in October. Consumers expected prices to rise by 4.7% over the next year, up from 4.6% in September and 3.4% in February, before the US-Israeli war with Iran began. Expectations for inflation over the next five years rose to 3.5% from 3.4%.
The Federal Reserve raised its benchmark overnight interest rate by 0.25 percentage points in September, bringing it to a range of 3.75% to 4.00%. The central bank also signalled that further increases in borrowing costs could follow.
However, weaker-than-expected employment gains in September and cooler inflation readings for July and August reduced the likelihood of another rate increase in October. Economists expected the Federal Reserve to raise rates again in December, according to the report.
The latest sentiment figures point to continued financial anxiety among American consumers, even as spending and stock markets show signs of resilience. With inflation expectations elevated and households facing different economic conditions depending on their income and investments, the outlook remains uneven ahead of the midterm elections.
