Consumer Confidence Index Rose 7.5 Points to 91.7 in October

By Amara Osei

Consumer confidence jumped 7.5 points in October to 91.7, its highest level since June, as gasoline prices eased from September, the Conference Board said Tuesday.

The Consumer Confidence Index (a monthly survey-based gauge of household sentiment about the economy, jobs and spending) improved on two fronts: better expectations for the future and a brighter view of the present situation for business and employment. The recovery, however, has a clear ceiling.

"The recovery was in line with retail gasoline prices easing from September to October," Fergus McCormick, senior economist for global indicators at the Conference Board, said in a statement. Still, "consumer confidence remained on the long-term downward trend that's persisted over the past few years," he said, noting that stubborn inflation has "eroded consumers' purchasing power."

How much relief did the gas pump actually deliver?

Not much. The average price for a gallon of gasoline has surged 28% during the past year to $4.26, according to AAA. Over the past month, the price has fallen from $4.47, a 4.7% decline. That dip is the entire basis of October's confidence gain — a fragile foundation if fuel costs reverse.

Despite some relief since September, "consumers continued to express frustration with rising costs," McCormick said, adding that "references to prices, the high cost of food and groceries, and oil and diesel prices rose" in write-in survey responses.

The Conference Board said consumers plan to trim spending on services and durable goods over the next six months. That is the number marketers should watch, not the headline index.

Why are economists skeptical of the rebound?

Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, put it bluntly: "The mood among consumers remains pretty bleak."

"The recovery in the headline index to its highest level since June comes as a surprise, given the still-high level of gas prices, stalling stock price appreciation and the lackluster labor market," Tombs said, referring to the Confidence Index.

The pessimism has a political edge. Price pressures have undermined real incomes and strained household budgets for months, shaping voter attitudes ahead of the Nov. 3 midterm elections.

Sentiment measures — including surveys by the University of Michigan and the New York Fed — have traced a decline since February, when air strikes by the U.S. and Israel against Iran reduced crude oil supply and pushed up fuel costs.

What do consumers expect from inflation?

Consumers expect 5.8% inflation on average over the next 12 months, the Conference Board said. Recent surveys by the Federal Reserve Bank of New York and the University of Michigan have also shown rising inflation expectations — a signal Fed officials track closely, believing such sentiments can become self-fulfilling.

The data already align with those expectations:

• The Consumer Price Index rose 3.7% annually in September, above forecasts, driven by fuel prices, the Bureau of Labor Statistics said this month.
• Core CPI (the index excluding volatile food and energy prices) climbed 2.6% annually in September, up from 2.4% in August.
• Inflation has exceeded the Fed's 2% target for more than five years.

The core CPI acceleration matters most: energy costs are showing signs of spreading through much of the economy, not just the pump.

The takeaway in plain words: one month of cheaper gasoline lifted the mood, but consumers expect worse inflation ahead and plan to cut spending — a weak signal for holiday-season demand.