A surprise drop in US consumer sentiment to a historic low of 48.2 in May reveals deep-seated anxiety over high prices and tariffs, threatening the outlook for consumer spending.
Back
US Consumer Sentiment Hits Historic Low of 48.2 on Price Fears
U.S. consumer sentiment unexpectedly deteriorated to a historic low in May, with households growing increasingly concerned about high prices for essential goods and the broader economic outlook. The University of Michigan’s preliminary sentiment index fell to 48.2, its lowest point since the survey began tracking monthly data in 1978 and well below the median forecast of 49.5 from economists.
"Consumer sentiment was essentially unchanged this month, coming in a scant 1.6 index points below April’s reading and comparable to the trough reached in June 2022," said Survey of Consumers Director Joanne Hsu. "Consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump."
The report’s details reveal a broad-based decline in confidence. The index of current economic conditions dropped about nine percent from the prior month, driven by a surge in worries about personal finances and poor buying conditions for major purchases. The reading of 48.2 for May compares to a final reading of 49.8 in April and 53.3 in March. About one-third of consumers mentioned gasoline prices, while 30 percent cited the impact of tariffs, suggesting trade policy is weighing on household sentiment.
The data presents a challenge for the economic narrative, as persistently low confidence could foreshadow a pullback in consumer spending, which accounts for the majority of U.S. economic activity. While year-ahead inflation expectations softened slightly to 4.5 percent from 4.7 percent, long-run inflation expectations remained elevated at 3.4 percent. These figures remain substantially above pre-pandemic levels and will be watched closely by the Federal Reserve as it calibrates future monetary policy. Other measures, such as the Conference Board’s consumer confidence survey, have also shown sentiment languishing at low levels, reinforcing the trend of a pessimistic American consumer.
This article is for informational purposes only and does not constitute investment advice.
[1] US consumer confidence hits a record low for the second consecutive month, with personal finances and buying conditions causing concern[2] President Donald Trump said U.S. consumer confidence is 'way up.' Metrics don't bear that out[3] Jobs report and consumer sentiment among economic data due Friday By...[4] Consumer Sentiment Declined 3.2% to 48.2 in May[5] Consumer sentiment slips more than expected in May
