Rising Optimism: U.S. Consumer Sentiment Boosted by Income Hopes and Lower Rates

U.S. consumer sentiment rose in October to a six-month high as households grew more positive about buying conditions, supported by slightly lower financing costs.

According to the University of Michigan, the final October sentiment index increased to 70.5 from 70.1 in September, and up from a preliminary reading of 68.9.

This marks the third month of rising sentiment, now reaching its highest level since April 2024 and over 40% above its low in June 2022. October's uptick is largely driven by better buying conditions for durable goods, supported by easing interest rates. The approaching presidential election is also shaping consumer expectations.

Additionally, income expectations rose to their highest since June, with respondents feeling more optimistic about the job market. However, lower-income consumers remain less confident about income growth compared to higher earners. Fewer consumers mentioned high interest rates as a negative factor for purchasing homes, durable goods, or vehicles.

Political views also influenced sentiment. Republican and independent voter confidence rose to its highest since April, while sentiment among Democrats dipped slightly.

How about Inflation?

Consumers expect inflation to rise at an annual rate of 2.7% over the next year, unchanged from the previous month. For the next five to ten years, they anticipate a 3% rate, down from 3.1%.

The University of Michigan's measure of durable goods buying conditions climbed to a four-month high, with more than half of consumers expecting further rate relief within the year, suggesting consumer spending will stay resilient and support the economy.