Inflation pushes consumer confidence to three-month low
High gas and food prices are hammering Americans' budgets
U.S. consumer sentiment fell in October following two months of gains, indicating Americans are less optimistic as they stare down the holiday season due to persistently high inflation.
The Conference Board reported its Consumer Confidence Index released Tuesday shows consumer confidence reading dropped to 102.5 this month, a decline from 107.8 in September and 103.2 in August.
People shop for discounted items at a supermarket in Monterey Park, Calif., Oct. 19, 2022. Food prices in September rose 13% over last year, according to data released by the U.S. government. (Federic J. Brown/AFP via Getty Images / Getty Images)
"Notably, concerns about inflation, which had been receding since July, picked up again, with both gas and food prices serving as main drivers," said Lynn Franco, senior director of economic indicators at The Conference Board.
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The latest consumer price index showed inflation was up 8.2% year-over-year in September, but food prices were up even higher at 13%. While the price of gasoline was down 4.9% on the month, it remained more than 18% higher than a year ago.
"Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers," Franco added. "And, given inventories are already in place, if demand falls short, it may result in steep discounting which would reduce retailers’ profit margins."
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Consumers' outlook for business conditions and the labor market also fell in October.
The Conference Board's Present Situation Index tumbled to 138.9, down from 150.2 the month before.
Customers purchase gas at a Gulf gas station Sept. 12, 2022, in Bensenville, Ill. (Scott Olson/Getty Images / Getty Images)
"The Present Situation Index fell sharply, suggesting economic growth slowed to start Q4," Franco said in a statement. "Consumers’ expectations regarding the short-term outlook remained dismal.
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"The Expectations Index is still lingering below a reading of 80 — a level associated with a recession —suggesting recession risks appear to be rising."