Michigan survey finds consumer sentiment subdued as inflation expectations rise

Final results published on 23 October by the University of Michigan Surveys of Consumers put the Index of Consumer Sentiment at 48.0, compared with 48.1 in September. It was 53.6 in October 2025, a year-on-year decline of 10.4%. The Current Economic Conditions index fell from 50.9 to 46.7, down 8.3% month on month and 20.3% from a year earlier. The Index of Consumer Expectations moved in the opposite direction, rising from 46.3 to 48.8. That was a 5.4% monthly increase but remained 3% below its October 2025 level of 50.3.

Joanne Hsu, director of the survey, said sentiment was only one-tenth of an index point below September. Gains among Republicans and Democrats were balanced by declines among independents. Year-ahead business-condition expectations improved about 14%, but remained 16% below last October. Hsu said the decline in current conditions was driven entirely by an 18% plunge in buying conditions for durable goods, which respondents related to higher interest rates and concerns about affordability. Purchasing power continued to dominate views of the economy. Overall sentiment was 10% below a year earlier and 15% below February, the month before the Iran conflict began, according to the survey commentary.

Median year-ahead inflation expectations ticked up to 4.7% from 4.6% in September. The survey team said the reading substantially exceeded February’s 3.4% and every reading in 2024. Long-run expectations rose to 3.5% from 3.4%, above the 2.8–3.2% range recorded during 2024. Expectations at both horizons increased for a second consecutive month and reached their highest levels since May.

A companion special report, published on the same day, set long-run expectations against a longer historical comparison. It compared the parallel web data collection used from 2017 through 2024 with the 2026 web interviews to provide a methodologically consistent view. The report cited average monthly sample sizes of 209 in 2019, 877 in 2024 and more than 1,000 in 2026. It said its findings were strengthened when recent readings were compared with the narrower three-month moving-average range for 2024, and that they also held against the historical official telephone collection used through mid-2024. The report described expectations easing after a 2025 tariff-policy shock and then rising again in 2026 as the Iran conflict lengthened and energy prices climbed. It cautioned that elevated expectations can become entrenched, while saying this is a risk rather than an inevitable outcome.