The University of Michigan consumer sentiment final reading for October is 63.8, up from the preliminary 63.0 in early October, and down from the final 67.9 in September. The October reading is slightly above the consensus of 63.0 in the Econoday survey of forecasters. Consumer sentiment declines for both current conditions and six-month expectations in October. While geopolitical factors cut into present sentiment only a little, it dragged down future sentiment more.

The current economic conditions index is down for the third month in a row to 70.6 in October from 71.1 in September, but stronger than the 56.6 in October 2022. The index of consumer expectations is down to 59.3 in October from 65.8 in September and not far above 56.6 in October 2022.

The 1-year inflation expectations measure jumps to 4.2 percent in October from 3.2 percent in September. Concerns of a new major conflict in the Middle East and ongoing worries about the war in Ukraine likely contributed to worries that inflation will heat up again in the near term. The 5-year inflation expectations measure is up 2 tenths to 3.0 percent and remains in line with the recent trend.

Consumer sentiment is expected to end October at 63.0, unchanged from the mid-month flash and more than 5 points lower than September.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.