US consumer sentiment deteriorated further in early October, with the preliminary University of Michigan index for the month coming in at 46.3, short of the 47.8 expected and down from a prior reading of 48.1.

The report's key components:

• Current conditions: 44.7 vs 51.0 expected
• Expectations: 47.3 vs 45.5 expected
• One-year inflation expectations: 4.7% vs 4.6% prior
• Five-year inflation expectations: 3.5% vs 3.4% prior

The release, once regarded as a reliable market mover that "fooled the Fed into hiking in the last cycle," has become increasingly unreliable and now serves more as a measure of the US political mood than anything else, according to commentary accompanying the report. Inflation expectations, however, remain worth watching, even if they are largely a read on gasoline prices. For what it's worth, the latest print is the worst reading in at least 50 years.

The University of Michigan's Surveys of Consumers is one of the longest-running gauges of US household mood, dating back to the late 1940s. Household spending accounts for roughly two-thirds of US economic activity, which is one reason consumer mood is tracked so closely by economists and policymakers. The headline sentiment index is built from two pieces: a current conditions index and a consumer expectations index. Each month brings a preliminary reading around mid-month and a final reading two weeks later. The survey moved fully online in 2024, which is part of why readings have run lower than in the pre-pandemic era.

Beyond the headline, the survey's inflation expectations receive considerable attention from the Federal Reserve and markets, tracked at both one-year and five-year horizons.

This year has been rough for household sentiment. It hit a record low of 44.8 in May as high prices, Strait of Hormuz supply disruptions and geopolitical uncertainty weighed on households. It recovered for a couple of months, reaching 55.2 in July, before sliding again.

The final September reading was 48.1, revised up from a preliminary 47.8 but down from 51.7 in August, according to the September final UMich report. That marked the second straight monthly decline and the lowest level in four months. Current conditions slipped to 50.9, and consumers reported worse views of their personal finances along with growing worries about prices. Sentiment stood 16% below February, before the Iran conflict began, and the decline has been broad across political affiliation.

The final October release is due on October 23. As September's data showed, when the final print was revised up from the preliminary 47.8 to 48.1, the preliminary estimate can shift before the final number lands.