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- Consumer confidence plunges as inflation accelerates, job growth cools and energy costs soar amid Middle East tensions, despite strong economic growth in Q3
By Dilara Zengin Okay, Sevgi Ceren Gokkoyun and Emir Yildirim
WASHINGTON / NEW YORK / ISTANBUL (AA) - Economic pressures from high inflation, rising energy prices, cooling job growth and affordability issues take center stage for voters ahead of the Nov. 3 midterm elections in the US, which will determine the balance of power in Congress.
Soaring living costs dominate voter preferences, public opinion polls ahead of the elections show.
Some 84% of registered voters consider the state of the economy very important to their vote, including 82% of Republicans and 88% of Democrats, a survey by the Pew Research Center on Oct. 8 found.
Accelerating inflation, weakening consumer confidence and persistently high borrowing costs just days before the elections underscore these concerns.
Energy costs continue to strain households amid tensions in the Middle East that began with the joint US and Israeli strikes on Iran at the end of February.
The American Automobile Association (AAA) reported that the average price of gasoline stood at $4.23 a gallon as of Oct. 29, marking a surge of more than 39% from the $3.04 average recorded during the same period last year.
Diesel prices remain at record highs of around $6.33 per gallon, up 72%. Since diesel is used in the transportation and agriculture sectors, soaring prices drive up costs throughout the supply chain.
The US is paying the heaviest toll of the Middle East conflict and the oil shock in the Strait of Hormuz, shouldering around $160 billion of the $468 billion in additional costs added to the global fuel bill, according to the nonprofit Center for Research on Energy and Clean Air (CREA).
Inflation remains well above the US Federal Reserve’s 2% target as the country’s consumer price index (CPI) rose 0.6% month-on-month and 3.7% year-on-year in September, pushing monthly and annual inflation to five-month and four-month highs, respectively.
The core CPI, excluding food and energy, rose 0.3% month-on-month and 2.6% year-on-year in September.
The producer price index (PPI) surged 1.3% month-on-month and 6.3% year-on-year in the same month, marking multiyear highs.
Fed Chair Kevin Warsh recently said Americans have been facing inflation that has remained above the bank’s target for nearly six years.
The Fed raised rates in September for the first time since 2023, hiking them by 25 basis points before maintaining rates at a range of 3.75%-4% this month. The bank had cut rates by a total of 75 basis points last year and maintained them at its first five meetings of this year.
The labor market also started to cool, with nonfarm payrolls rising by only 29,000 in September, well below estimates, while the figures for July and August were revised downward by a combined 60,000 jobs.
The number of initial jobless claims fell to 194,000 in the week ending Oct. 24, the lowest level since mid-July.
While the unemployment rate rose slightly by 0.1 percentage points to 4.2%, representing 7.1 million people, the US economy showed resilience in the third quarter, growing at an annual rate of 3.4%, driven by private consumption and massive tech investments.
This performance failed to positively influence consumer sentiment, as the University of Michigan’s consumer sentiment index dropped to a five-month low of 48 in October amid a rise in short-term inflation expectations to 4.7%.
Consumer confidence declined by 10% year-on-year and 15% compared with February, before tensions with Iran escalated.
Meanwhile, inflationary pressures and expectations of tighter monetary policy kept bond markets under selling pressure, with the US 10-year and 30-year Treasury yields hitting 24-year highs earlier in October before retreating somewhat, although they remained elevated.
At the same time, the housing market came under pressure from high financing costs as 30-year fixed mortgage rates hovered around 7.37%, according to the Mortgage Bankers Association (MBA).
Pending home sales dropped 11.3% year-on-year and 7.3% month-on-month in September, data from the National Association of Realtors (NAR) showed.
The US federal budget ran a deficit of $1.99 trillion in fiscal year 2026, marking the highest level since the COVID-19 pandemic, while total public debt hit $40.4 trillion.
Net interest payments on the massive debt exceeded $1 trillion as debt servicing became the federal government’s third-largest spending item, surpassing defense and overall health care, while ranking behind Social Security and Medicare.
Trade protectionism also drove up domestic cost pressures. Although the Supreme Court struck down initial tariffs under the International Emergency Economic Powers Act (IEEPA), Washington imposed new tariffs of 10%-12.5% on the EU and other countries under Section 301 of the Trade Act of 1974.
Some 69% of registered voters disapproved of US President Donald Trump’s tariff policies, according to a poll by Fox News in mid-October.
Some 81% of participants in an Ipsos poll conducted in September think tariffs directly drove up prices.
A recent poll by The New York Times/Siena College showed that 64% of registered voters disapprove of the current administration’s handling of the US economy.
Some 69% of voters disapproved of Trump’s stance on the cost of living, while 65% disapproved of his approach to the war in Iran.
Some 73% expressed dissatisfaction with the policy Trump has pursued regarding gasoline prices, the survey showed.
Economic pressures will decide the outcome of the elections, given that key races for seats in the House of Representatives and the Senate are neck and neck.
Dilara Zengin Okay,Sevgi Ceren Gökkoyun
