By Lucia Mutikani
WASHINGTON, Oct 9 (Reuters) - US consumer sentiment slumped further in early October as the rising cost of living because of the Middle East conflict soured households' views of the economy, more bad news for President Donald Trump ahead of the November 3 midterm elections.
The University of Michigan's Surveys of Consumers was the latest in a series of recent polls to capture the darkening mood among Americans, who are being squeezed by high inflation and borrowing costs. Trump's approval rating is at the lowest of his political career amid angst over his handling of the economy.
Next month's elections will determine control of Congress.
The US-Israeli war has raised energy prices, fanning inflation and prompting the Federal Reserve to raise interest rates in September for the first time in three years.
Sentiment deteriorated sharply this month among lower-income consumers and those with smaller stock portfolios, the University of Michigan said on Friday. There was also a decline in morale among respondents identifying as Independents. Though there was an uptick among Democrats and Republicans, sentiment remained considerably lower than it was in January this year.
"Consumers across the political spectrum are frustrated with rising prices and a sense of treading water financially," said Jim Baird, chief investment officer at Plante Moran Financial Advisors. "It may not be readily apparent in headline GDP data, but it's likely to be very apparent as voters cast their ballots in the coming weeks."
The University of Michigan's Consumer Sentiment Index dropped to 46.3 this month from 48.1 in September. The third straight monthly decline pushed sentiment close to a record low plumbed in May. Economists polled by Reuters had forecast the index at 47.8.
The survey's measure of current economic conditions slumped to an all-time low of 44.7 from 50.9 in September. Consumers' expectations improved modestly, though buying conditions for durable goods plunged amid high prices and borrowing costs.
HIGHER-INCOME HOUSEHOLDS DRIVING SPENDING
Weak sentiment likely does not mean a significant slowdown in consumer spending as the relationship between the two has weakened over the years. The economy also resembles what economists describe as a K-shape, where the higher-income households are doing well, partly thanks to a strong stock market performance, compared to their middle- and lower-income counterparts, whose budgets are under strain.
Consumer spending is mostly being driven by higher-income households. That was reinforced by a separate report from the University of Michigan showing just under a third of consumers expected to spend as usual in the coming year on items that have experienced large price increases, while 54% said they would cut back. About 16% of consumers said they would stop buying.