U.S. Consumer Sentiment Spirals to Record Low as Inflation Concerns Intensify

Concerns over inflation and rising gasoline prices have sent the University of Michigan’s Index of Consumer Sentiment to its lowest level since data collection began in 1978.

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The index registered a reading of 48.2 in May, down from 49.8 in April and below the estimate of 49.5. The lower sentiment was driven by a 9% drop in the current conditions index amid consumer anxiety over personal finances and buying conditions. “Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump,” said Survey of Consumers Director Joanne Hsu.

Inflation Expectations Ease but Remain Elevated

Meanwhile, year-ahead inflation expectations eased to 4.5% from 4.7%, although they remain well above the pre-war level of 3.4%. Long-term inflation expectations edged down to 3.4% from 3.5%.

Prices at the pump have risen by $1.57, or 53%, to $4.55 since the onset of the U.S.-Iran war on February 28. Gas prices are likely to remain elevated, even with a reopening of the Strait of Hormuz, due to damaged energy infrastructure in the Middle East.