By Lucie Mutikani
WASHINGTON, Oct 9 (Reuters) – U.S. consumer confidence fell further in early October as the rising cost of living due to conflict in the Middle East worsened consumer sentiment on the economy, further bad news for President Donald Trump ahead of the Nov. 3 midterm elections.
The University of Michigan consumer surveys are the latest in a series of recent polls aimed at capturing the gloomy mood of Americans, who are “being crushed by high inflation and high borrowing costs.” Trump’s approval rating is at the lowest point of his political career, amid angst over his handling of the economy.
Next month’s elections will determine control of Congress.
The war between the United States and Israel has driven up energy prices, stoking inflation and prompting the Federal Reserve to raise interest rates in September for the first time in three years.
Confidence deteriorated sharply this month among lower-income consumers and those with small stock portfolios, the University of Michigan said Friday. There was also a drop in morale among respondents identifying as independent. Although there was an uptick among both Democrats and Republicans, confidence remained considerably lower than in January of this year.
“Consumers across the political spectrum are frustrated by rising prices and feeling like they are treading water financially,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “This may not show up clearly in the overall GDP data, but it will likely become very evident when voters cast their ballots in the coming weeks.”
The University of Michigan’s consumer confidence index fell to 46.3 this month from 48.1 in September. The third consecutive monthly decline pushed confidence to an all-time low reached in May. Economists polled by Reuters had forecast an index of 47.8.
The survey’s measure of current economic conditions fell to an all-time low of 44.7 from 50.9 in September. Consumer expectations have improved slightly, although purchasing conditions for durable goods have plunged amid high prices and borrowing costs.
HIGH-INCOME HOUSEHOLDS DRIVE EXPENDITURE
Weak sentiment likely doesn’t mean a significant slowdown in consumer spending, as the relationship between the two has weakened over the years. The economy also resembles what economists describe as a K-shape, in which higher-income households are doing well, thanks in part to strong stock markets, compared to their middle- and lower-income counterparts, whose budgets are under pressure.
Consumer spending is primarily driven by higher-income households. That was reinforced by a separate report from the University of Michigan showing that just under a third of consumers expect to spend as usual in the coming year on items that saw big price increases, while 54% said they would cut back. About 16% of consumers said they would stop buying.
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