US consumer sentiment fell for a third straight month as views of current conditions hit a record low
The 30-year fixed mortgage rate climbed to 7.49%, its seventh straight weekly rise and highest since November 2023
German factory orders dropped 10.6% in August, while French bond yields hit their widest gap versus Germany since 2011
Households on three continents are feeling the squeeze at once. In the US, consumer sentiment deteriorated for a third consecutive month in early October, with views of current economic conditions tumbling to a record low as inflation weighed on wallets. Views of buying conditions for durable goods also hit a record low. These are implemented, real-time survey readings, not projections. Adding to the pressure, the Institute for Supply Management’s services index slipped 0.5 point to 54.9 in September, even as cost pressures grew at the fastest pace in more than four years.
Cracks Spread From Washington to Berlin and Paris
The pain is not confined to America. German factory orders fell 10.6% in August, the sharpest drop since January, following a 3.2% gain in July, a stumble for a manufacturing sector trying to find its footing. Meanwhile, a selloff in French government bonds has pushed the extra yield investors demand to hold French 10-year debt over German equivalents to its highest level since 2011, as France struggles to narrow one of the eurozone’s largest budget deficits ahead of next year’s presidential election. In the US, the 30-year fixed mortgage rate rose 19 basis points in the week ended October 2 to 7.49%, its highest point since November 2023, and mortgage activity fell in response.
What This Means for Your Wallet
A 7.49% mortgage rate means a bigger monthly payment for anyone financing a home purchase today compared with just two months ago. Weaker German and French growth, combined with rising borrowing costs, tends to ripple into slower hiring and softer wage growth over time. For now, the message for everyday consumers is that borrowing, whether for a home or a car, is getting more expensive just as price pressures on everyday services remain stubborn.
Why It Works This Way
Mortgage rates generally track government bond yields, because lenders price home loans off the returns investors can get on safer debt. When investors demand higher yields, as they are now doing with French bonds and have done with US Treasuries, borrowing costs across the economy tend to follow. This week, check whether your own mortgage or loan has a fixed or variable rate, since variable-rate borrowers feel these shifts far faster than those locked into fixed terms. Disclaimer: This analysis is for educational and informational purposes only and should not be construed as financial or investment advice.
What to Watch Next
Watch for the next round of US consumer sentiment data, the French government’s budget negotiations, and fresh German industrial figures in the coming weeks. For full details, see the original Bloomberg reporting via The Economic Times.
