Inflation and high interest rates continue to weigh on sentiment, U.S. consumer confidence falls to lowest level since May in October.

Preliminary survey data released by the University of Michigan on Friday showed that U.S. consumer confidence deteriorated further in October, with consumers' assessment of current economic conditions falling to the lowest level on record. Persistent inflationary pressure, elevated gasoline prices and rising borrowing costs are further squeezing American household budgets. The data showed that the preliminary reading of the University of Michigan consumer sentiment index fell to 46.3 in October, the lowest since May this year and below economists' previous expectation of 47.6. The index measuring consumers' views of current economic conditions dropped sharply to 44.7 from 50.9 in September, the lowest level on record. However, the consumer expectations index edged up to 47.3 from 46.3, rising for the first time since July. On inflation expectations, consumers expect prices to rise 4.7% over the next year, slightly higher than 4.6% in September; longer-term inflation expectations for the next five to 10 years rose to 3.5%, also up slightly from last month, indicating consumers remain cautious about the future path of prices. Recently, persistently high gasoline prices, combined with rising borrowing costs and slowing corporate hiring, have further weighed on consumer confidence. At the same time, overall U.S. price growth has outpaced wage growth over the past few months, squeezing households' real purchasing power. Joanne Hsu, director of the University of Michigan consumer survey, said confidence declines this month were particularly pronounced among low-income consumers and those with smaller stock holdings. By political affiliation, confidence improved among Democrats and Republicans but was offset by a decline among independents. "Despite the differences, consumers of all political stripes agree that the U.S. economic outlook has worsened compared with before the Iran conflict broke out earlier this year," Hsu said. Notably, although U.S. consumer confidence has remained at historically low levels for much of this year, actual consumer spending has remained relatively resilient. An overall stable job market and strong stock market performance continue to support consumer spending on goods and services. The survey showed that consumers' assessments of their own current financial situation were roughly unchanged this month, but concerns about rising interest rates pushed their views on buying conditions for durable goods such as cars and appliances to the lowest level on record. In addition, a special report released by the University of Michigan on Friday on the impact of rising gasoline prices showed that only about 31% of respondents expect to maintain normal spending levels over the next year, while more than half said they would cut spending on household goods, cars, dining out and vacations. The consumer confidence survey covered responses collected between Sept. 22 and Oct. 5. Overall, although U.S. consumer spending has not yet weakened markedly, persistent inflation, rising energy prices and climbing financing costs are prompting more and more households to consider tightening their budgets, and the outlook for future consumption growth still faces pressure.