U.S. consumer sentiment declined this month, with October's final reading coming in at 53.6 (revised from 55.0) vs. 55.1 in September and 58.2 in August. This matches the consensus in the Econoday survey of forecasters.

There has been little shift in the dour outlook for the economy, although the ongoing government shutdown has still not influenced sentiment.

Overall, consumers perceive few material changes in economic circumstances from last month; inflation and high prices remain at the forefront of consumers' minds, the report said.

"A modest increase in sentiment among younger consumers was offset by decreases among middle-age and older consumers. Current personal finances inched up, while expected personal finances receded, it added.

The final year-ahead inflation expectations dipped to 4.6 percent in October, from 4.7 percent in September.

Long-run inflation expectations in October rose to 3.9 percent from 3.7 percent last month. Inflation uncertaintyas measured by the interquartile range of expectationsticked up for both time horizons this month, the report said.

The index is expected unrevised at 55.0 in the October final from 55.0 in the October flash and 55.1 in September. One-year inflation expectations also expected unchanged at 4.6 percent from the flash.

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.