Consumer sentiment sinks to second-lowest level on record as gas prices climb
The University of Michigan's October consumer sentiment index fell to its second-lowest reading since 1978 as gasoline prices and inflation expectations rose, with 85% of consumers saying it is a bad time to buy a home.
American consumer confidence fell to its second-lowest level in nearly 50 years of recordkeeping this month, as high gasoline prices and years of elevated inflation continued to drag down sentiment weeks before the midterm elections, according to a University of Michigan survey released Friday.
The October consumer sentiment index was the second weakest on records dating back to 1978. The record low, 44.8, was set in May, when the national average for a gallon of unleaded hit a four-year high of $4.56 because of oil supply shocks stemming from the war with Iran.
Five months later, the pump is offering little relief. A gallon of regular unleaded is averaging $4.29 nationwide, about 40% more than in October 2025. Diesel stands at $6.32 a gallon, nearly 75% higher than a year ago, and Brent crude topped $116 a barrel on Friday for the first time since March, closing in on a 4.5-year high.
Price pain crosses party lines
Sentiment is now 10% below last year and 15% below February, before the war began. In October, 56% of consumers said higher prices were hurting their personal finances, a share that has risen for four straight months. Joanne Hsu, the University of Michigan economist who directs the Surveys of Consumers, said frustration is growing across the political spectrum, with Republicans recording the largest proportional increase.
“These increases are seen across the political spectrum, with Republicans exhibiting the largest proportional rise,” Hsu said in a statement. She added that consumers with no stock holdings or only small holdings reported growing concern about the effect of high prices on their finances this year, while those with the largest holdings reported little change since February.
Rising interest rates are adding to the strain. Homebuying conditions have fallen sharply, with 85% of surveyed consumers saying it is a bad time to buy a home.
Inflation expectations keep rising
The survey found consumers expect inflation to stay high. Year-ahead expectations ticked up to 4.7% from 4.6%, moving further from the 3.4% recorded in February before the U.S.-Israeli strikes on Iran. Long-run expectations rose to 3.5% from 3.4%.
Those expectations matter to the Federal Reserve, which watches them closely: if people believe prices will keep climbing, they may spend sooner and demand higher wages, and businesses may raise prices in turn. The Fed’s rate-setting committee meets next week, with a decision expected Wednesday at 2 p.m. ET, its last move on borrowing costs before the midterms.
Oil analysts see little chance of near-term relief. “There is broad consensus that escalation is coming and that it could diminish flows of oil out of the Middle East,” said Gregory Brew, senior analyst at consulting firm Eurasia Group. “Right now, a lot of oil is coming out, but it’s expensive. There is very little confidence that supply is sustainable.”
Reporting based on coverage by CNN.
