Consumer Sentiment Plunges to Six-Month Low on Inflation and Job Market Concerns

According to a recent survey from the University of Michigan, US consumer sentiment has reached a six-month low due to increasing concerns about inflation and the job market. The preliminary reading for May revealed that the sentiment index fell to 67.4, significantly lower than the 77.2 recorded in April and below analyst forecasts. This decline is consistent across various demographic groups, including those of different ages, incomes, and educational backgrounds. The survey also found that consumers anticipate price increases of 3.5% over the coming year, which is the highest rate recorded in six months, and 3.1% over the next five to ten years, up marginally from the previous month. These findings suggest that the strength of household income, which has supported robust consumer expenditure over the past two years, may be waning, potentially resulting in reduced spending habits. The survey further indicates that growing concerns regarding high interest rates have contributed to the erosion of consumer confidence, with only a quarter of respondents expecting interest rates to decrease within the next year, compared to 32% in April. The declining sentiments also extend to current circumstances and future expectations, with measures of current conditions and expectations both recording six-month lows. The survey highlights that both Democrats, Republicans, and independents have experienced a decline in confidence in the current economic climate. As the US presidential election approaches, these findings indicate significant challenges for President Joe Biden in persuading Americans that his administration’s policies have benefited the economy.