48.0, and the fridge is the part that fell

A headline index can hide a week’s worth of psychology. The University of Michigan’s final consumer sentiment reading for October came in at 48.0, against 48.1 in September and 53.6 a year ago¹. Desk arithmetic: a change of one tenth of a point. If you stop there, nothing happened. Two lines below, a great deal did.

Two moods in one survey. The index of current economic conditions fell from 50.9 to 46.7, while the index of consumer expectations rose from 46.3 to 48.8¹. People felt somewhat better about the road ahead and clearly worse about where they stand. The survey’s director, Joanne Hsu, says the drop in current conditions was “driven entirely” by buying conditions for durable goods, which “plunged 18%” on higher interest rates and worries about affordability¹. Year-ahead business conditions improved by about 14%, but remain 16% below last October¹.

The price tag in the head. Expected inflation for the year ahead rose from 4.6% to 4.7%, against 3.4% in February, before the Iran conflict began; long-run expectations rose from 3.4% to 3.5%¹. Both horizons have risen for two months in a row, to their highest since May¹. “Purchasing power continues to dominate consumer views of the economy,” Hsu writes¹. Sentiment is 15% below February¹. Increases among Republicans and Democrats were offset by declines among independents¹, which is a reminder that a national mood is an average of tribes.

The same shape in Nuremberg. German households, surveyed on the other side of the Atlantic, drew the same picture on Wednesday. NIM’s consumer climate edged down to −30.8 for November while economic expectations rose for a sixth month in a row and the willingness to make big purchases slipped again². In both countries people are separating the country’s prospects from their own wallets, and trusting the wallet.

For you. This is not gloom; it is bookkeeping. When the price of a fridge and the interest on the loan for it both feel high, waiting is a rational answer, and surveys pick that up before shop tills do. If you are weighing a large purchase yourself, the useful questions are the dull ones: what it costs to borrow, whether the old one still works, and whether the price has actually moved or only the headlines about it. Nothing here is investment advice.