Surprising Drop In Consumer Confidence Mid-October May Prove Fleeting

The University of Michigan’s Consumer Sentiment Index record a surprising mid-month drop in October, falling more than three points to 87.9 from 91.2 in September’s final reading. It was the index’s lowest reading in 13 months and the second lowest mark in two years.

The preliminary reading on the research group’s Expectations Index plunged more than seven points to 76.6, while the Current Situation Index actually rose slightly. This led Richard Curtin, the Surveys of Consumers’ chief economist to speculate that the looming presidential election may be a factor. Noting that the decline in confidence was concentrated among households with less than $75,000 in annual income, Curtin said, “It is likely that the uncertainty surrounding the presidential election may have had a negative impact, especially among lower-income consumers. Without that added uncertainty, the confidences measures may not have weakened.”

And this may mean that the decline in confidence may be a short-term phenomenon, given the strength of continued jobs growth, retail sales trends and continued low gasoline prices.