Consumer Buying Conditions Deteriorate
The weakness in today’s consumer survey sits where businesses can feel it: willingness to make a large purchase. The University of Michigan’s preliminary October report, released Friday at 10 a.m. Eastern, says buying conditions for durable goods deteriorated sharply as high prices and borrowing costs weighed on households. These are purchases such as cars and appliances, which can often be postponed.
The overall sentiment index fell to 46.3 from September’s final 48.1. That modest headline change masks a larger split. The current-conditions index dropped to 44.7 from 50.9, while expectations for the future improved to 47.3 from 46.3. We take the deterioration in conditions seriously, but the improvement in expectations argues against treating this as an across-the-board collapse in confidence.
A separate Michigan report published today makes the spending connection clearer. In 3,492 interviews conducted from June 23 through September 21, only 31% expected to keep buying as usual when items had large price increases, compared with 37% in its 2022 comparison. Only 14% considered it a suitable time to borrow for a major purchase. Those interviews predate October’s survey. They provide context for today’s warning, rather than proof that spending suddenly fell this morning.
For the Fly High universe, the most direct exposure is to businesses selling discretionary goods and the lenders financing them. If customers delay purchases, revenue can weaken while wages, rent and interest bills continue. Less left after those costs means less earning power available to support dividends. Business development companies, which lend to businesses, could feel the pressure through borrowers whose sales depend on those customers. We would watch whether weaker sales become missed payments or loans that stop earning interest.
The effect will vary. A business serving households with more financial room may hold up better; Michigan’s detailed report finds higher-income households more willing to maintain spending. Essential purchases also behave differently: switching to cheaper groceries does not necessarily reduce total grocery spending. Credit funds exposed to consumer-sensitive borrowers warrant closer attention, but this survey alone does not establish new credit losses or a dividend problem.
Households’ expected inflation also edged higher, to 4.7% over the coming year and 3.5% over the longer term. These are expectations, not measured inflation or a new interest-rate decision. Our concern is practical: reluctant customers and persistent costs can squeeze earnings together. The view would improve if actual sales remain firm and borrowers continue paying interest from operating earnings. October’s final survey on October 23 will refine the picture; reported sales, margins and loan performance will tell us whether the caution is becoming a business problem.
Sources
- University of Michigan, preliminary October 2026 consumer survey
- University of Michigan, October 9 report on gasoline prices and expected spending
- New York Fed, October release calendar
This article is general information, not personalized investment advice. Fly High Investing may hold securities discussed in this article.