US Consumer Sentiment Nears a Record Low as Fed Survey Shows Loan Delinquencies Highest Since 2010

US consumer sentiment slid for a third straight month in October. The University of Michigan's preliminary index fell to 46.3 from 48.1 in September, below the 47.8 economists polled by Reuters had expected, and close to the record low set in May. The survey's current-conditions gauge did set a record, falling to an all-time low of 44.7 from 50.9. "Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year," survey director Joanne Hsu said.

Inflation expectations kept edging up. Consumers now expect 4.7% inflation over the next year, up from 4.6% in September, and 3.5% over the next five years, up from 3.4%. Twelve-month expectations stood at 3.4% in February, before the US-Israeli war with Iran began, and energy and price pressure has pushed them higher since. That matters for policy: the Fed raised its benchmark rate by 25 basis points last month to a 3.75%-4.00% range. On spending, 54% of consumers said they would cut back, against just under a third who expected to spend as usual.

A separate Federal Reserve release on Friday showed how household balance sheets have changed. In the Survey of Consumer Finances, published every three years, the share of families behind on loan payments rose from about 12% in the prior survey to nearly 20% in the three years ended 2025, the highest since 2010. Families two months or more behind rose to more than 8% from 5% in 2022, and the share with payments above 40% of income climbed to 8.6% from 6.5%. At the top, the highest income group saw median net worth rise 31%.

Together the two releases describe a split consumer: lower-income households are under strain while wealthier, stock-owning households have gained. For markets, the question is whether that strain reaches spending and credit. Retail sales, card and auto delinquency trends in bank earnings, and the Fed's response to higher inflation expectations are the next places to look.