NEW YORK — Consumer sentiment, as tracked by the University of Michigan, plunged in October for the third consecutive month, dropping to its lowest level in 13 years, and lending credence to industry views that holiday spending will not be as strong as last year.

The Index of Consumer Sentiment registered a reading of 74.2 in October, down from a preliminary reading of 75.4 and compared with September’s reading of 76.9 and August’s reading of 89.1. The three-month decline was the second largest on record.

Richard Curtin, director of the University of Michigan’s Surveys of Consumers, cited in a press release “the cumulative strain of higher prices on the financial situation of consumers” for the decline in the index.

He added, “The current outlook for higher costs of home heating, higher interest rates and falling real incomes will cause cutbacks in consumer spending in the coming months.”

Curtin estimated that real consumption spending will increase 1 percent in both this year’s fourth quarter and the first quarter 2006.

According to the survey results, more than one-third of consumers said their finances had worsened in October due to inflation. “More consumers cited higher prices than any time since 1982, and just as important, the fewest consumers cited income gains in more than a decade,” Curtin said.

Consumers surveyed in October were also worried about high home prices as well as how rising gas prices were affecting their vehicle- buying decisions.

Job security and future income worries impacted buying plans for home electronics, appliances and furniture, the survey also found.

Meanwhile, the Index of Consumer Expectations, a component of the Index of Leading Economic Indicators, declined slightly to 63.2 in October versus 63.3 in September and 85.5 in August, the University of Michigan said. According to the report, the small decline is a “pause” that is “typical of past recessionary cycles.”

In other words, consumers are gauging the true extent of the economy’s weakness and are determining how they should revise their expectations.

This story first appeared in the October 31, 2005 issue of WWD. Subscribe Today.

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