US consumer sentiment ticks higher for second month but remains subdued

University of Michigan index rises to 65.4 in October, but is still well below pre-pandemic levels

Consumers are more optimistic about the short-term economic outlook, but remain pessimistic about the long-term

US consumer sentiment ticked higher for the second month in a row in October, but remained well below pre-pandemic levels, according to a survey released Friday by the University of Michigan.

The university's consumer sentiment index rose to 65.4 in October, from 65.2 in September, but is still well below the pre-pandemic level of 99.3 in February 2020.

Consumers are more optimistic about the short-term economic outlook, with the index of expectations rising to 65.7 in October, from 64.9 in September. However, they remain pessimistic about the long-term, with the index of current conditions falling to 64.8 in October, from 65.5 in September.

The improvement in consumer sentiment is likely due to the recent decline in gas prices and the strong job market. However, consumers remain concerned about the rising cost of food and other necessities.

"Consumers are feeling somewhat better about the economy, but they are still not out of the woods," said Richard Curtin, chief economist of the University of Michigan's Surveys of Consumers.

"The recent decline in gas prices has helped to ease some of the financial pressures on households, but the rising cost of food and other necessities is still a major concern," Curtin said.

Curtin said that consumers are also worried about the potential for a recession.

"Consumers are aware of the risks of a recession, and they are taking steps to prepare for a possible downturn," Curtin said.

The University of Michigan's consumer sentiment index is a leading indicator of consumer spending, which accounts for about two-thirds of US economic activity.