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U.S. Consumer Sentiment Cooled Slightly in Early October -- Update

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10/12/2018 | 11:26am EST

By Sarah Chaney

A measure of economic confidence among American households edged down in early October but remained at a high level.

The University of Michigan on Friday said its preliminary index of U.S. consumer sentiment dropped to 99.0 in October from 100.1 in September.

Sentiment about current economic conditions decreased in October, while economic expectations also weakened.

Richard Curtin, the survey's chief economist, said sentiment was pulled down by consumers' less optimistic evaluation of their personal finances.

"Unfortunately, the downward revisions in the rate of growth in household incomes were accompanied by upward revisions in the year-ahead expected inflation rate, weakening real income expectations," Mr. Curtin said.

Expectations for stronger inflation had been building this year. Short-term inflation expectations rose in October to 2.8% from 2.7% a month earlier. Longer-term inflation expectations slipped, though.

More broadly, measures of consumer confidence have significantly improved since late 2016, buttressed by a historically low unemployment rate, steady income gains and a rising stock market.

In September, the Conference Board's measure hit an 18-year high.

Earlier this week, stock markets across the globe suffered their biggest shakeout since February on concerns around the steep climb in bond yields, higher oil prices and building trade tensions.

While stock-market fluctuations can influence consumer confidence, Mr. Curtin noted that the sharp stock market selloff had "virtually no influence" on the preliminary October data.

Elsewhere in Friday's report, confidence in the government's economic policies climbed in October to the highest level in 15 years, primarily due to Democrats expressing slightly more confidence, though still much less than Republicans.

Since the 2016 presidential election, divergence in sentiment by political party has been particularly pronounced, with a split between downbeat Democrats and upbeat Republicans since the 2016 election. The index for self-identified Democrats clocked in at 81.8 in October versus 128.2 for Republicans.

Write to Sarah Chaney at sarah.chaney@wsj.com

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