Consumer Sentiment Sits Near a Record Low. Half of Top Stockholders Still Plan to Spend as Usual.

The University of Michigan's consumer sentiment index fell to 46.3 in early October. That is 1.8 points below September and close to the record low set in May. The current-conditions gauge inside it hit 44.7, an all-time low. In the same two days, the Labor Department reported 197,000 initial jobless claims, and the S&P 500 closed Friday at 7,811.54.

Two data sets that disagree

Initial claims for unemployment benefits were 197,000 in the week ending October 3, according to the Labor Department. The four-week average was 198,000. Continuing claims stood at 1.716 million. Reuters reports that claims have stayed near 57-year lows for four straight weeks, a number that does not fit a record-low mood.

The hiring side is weaker. The Bureau of Labor Statistics counted 29,000 new payroll jobs in September and an unemployment rate of 4.2 percent. Average hourly earnings rose 3.0 percent over 12 months to $37.81. Michigan's respondents expect prices to rise 4.7 percent over the next year. In February, before the war with Iran began, the figure was 3.4 percent. One figure is realized pay growth and the other is a survey expectation, so they are not a clean subtraction. Still, the gap points the same direction as the complaints.

Gasoline is the clearest driver. Michigan's own report, citing AAA, puts the average price at about $2.93 a gallon before the conflict. It rose above $4.50 in May and neared $4.50 again in September. Jim Baird, chief investment officer at Plante Moran Financial Advisors, told Reuters that households across the political spectrum feel "a sense of treading water financially."

Who says they will keep spending

The more useful table is in a separate Michigan report released the same day. Interviews between June 23 and September 21 asked whether people would stop buying, cut back on, or keep buying things with large price increases. Only 31 percent said they would buy as usual. In 2022, near the peak of post-pandemic inflation, the share was 37 percent. In 2025, during the tariff shock, it was 26 percent.

The averages hide a wide spread by portfolio. Half of the top third of stockholders expect to spend as usual, up from 39 percent in 2025. Of people with no stock, 18 percent do, and 26 percent say they will stop buying such items altogether, against 7 percent at the top.

• Upper third of stock holdings: 50 percent spend as usual, 43 percent cut back, 7 percent stop.
• Lower third of income: 20 percent spend as usual and 24 percent stop. Upper third of income: 42 percent and 9 percent.
• Republicans: 48 percent spend as usual. Democrats: 27 percent. Independents: 28 percent.

Sentiment scores line up with the intentions. Those who plan to spend as usual average 78.6 on the index. Those who plan to cut back average 42.5. Those who plan to stop average 27.5, with year-ahead inflation expectations of 5.3 percent.

The party split complicates the wealth story. Michigan reports each cut of respondents separately, so the tables do not show how much of the stock-ownership gap is really a party gap.

What keeps the spending going

Reuters writes that the economy resembles a K shape, with higher-income households carrying consumer spending on the back of strong equity returns. James Knightley, chief international economist at ING, told the wire: "as long as equity markets hold up, spending can keep going." A stock market correction, he said, would change the situation quickly. That is a forecast about a risk, not a data point.

There is also a reason to read the sentiment number with caution. Reuters notes that the link between sentiment and actual spending has weakened over the years. And the Michigan question asks about intentions, not receipts. Director Joanne Hsu's report says consumers could cut spending on some items without cutting total expenditures. It adds that drivers have little room to reduce a commute.

The headline index also understates the pressure on the people at the bottom. Hsu said in the release that sentiment fell steeply among lower-income consumers and those with smaller stock portfolios, "groups that have fewer resources to weather increases in prices." Durable-goods buying conditions fell on high prices and borrowing costs. The Federal Reserve raised its benchmark rate 25 basis points in September, to a range of 3.75 percent to 4.00 percent. Reuters reports that economists expect another increase in December.

The final October reading is due October 23. The 46.3 averages two groups living different years, and the second group depends on a stock index that closed Friday 0.59 percent higher.