Consumer Sentiment at Record Low

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This article was authored by: Brooke DiPalma

A preliminary reading of US consumer sentiment for the month of May showed that higher prices at the pump and rising costs due to the US-Iran war are impacting Americans’ mindset on the state of the economy. The University of Michigan’s Index of Consumer Sentiment showed consumer sentiment declined to 48.2 in the month of May, marking the lowest level on record. Sentiment fell further from April’s final reading of 49.8 and was “comparable to the trough reached in June 2022.” Overall, consumer sentiment fell 3.2% from last month and 7.7% from a year ago, as rising cost pressures and fuel prices weigh on consumers. Gas prices have increased by more than $1.50 on average since the beginning of the war, according to AAA, and are now creeping toward $5 per gallon nationwide. In California, average prices are already above $6 per gallon. Friday’s reading from the University of Michigan also showed year-ahead inflation forecasts eased to 4.5% in May from 4.7% in April. Long-term inflation expectations decreased to 3.4% in May, down from 3.5% in April, the highest level since last October. In recent months, they have consistently remained higher than the levels around 2.8% seen in 2019 and 2020.