Inflation and Interest Rates Dent Consumer Confidence in UMich Survey

The latest University of Michigan consumer sentiment survey released on Friday demonstrated a significant decrease in overall sentiment during the month of May. The index reading for the month stood at 67.4, representing a 13% decline from the previous month’s figure and marking its lowest level in six months. This stark contrast is due to mounting concerns over persistently high inflation and interest rates, causing anxieties regarding potential rising unemployment levels. Although the current sentiment Index is still approximately 14% higher than the same time last year, there has been a persistent pessimistic outlook among consumers since the outbreak of the pandemic, with inflation reaching record heights in 2021. The Consumer Price Index (CPI) has remained stubbornly high this year, following a steep fall in 2022, from a peak of 9.1% in June 2022 to 3% a year later. In March, prices increased by 3.5%, compared to a year earlier, up from 3.2% in the preceding month. Fed officials have indicated that they will maintain their benchmark interest rate at its highest level in 23 years for as long as necessary to contain inflation within the vicinity of their 2% objective.