ANN ARBOR, MICHIGAN / Content Syndication Services / — U.S. consumer sentiment fell to a fresh record low in May as households reported deeper concern over high prices, gasoline costs and inflation linked to supply disruptions around the Strait of Hormuz during the Iran conflict, according to final monthly data from the University of Michigan Surveys of Consumers.
The index of consumer sentiment dropped to 44.8 in May from 49.8 in April, a 10.0% monthly decline and a 14.2% fall from 52.2 a year earlier. The May reading was revised below the preliminary figure of 48.2 and moved below the previous historical trough recorded in June 2022, extending the survey’s decline for a third consecutive month.
The University of Michigan said current economic conditions fell to 45.8 in May from 52.5 in April, while the index of consumer expectations decreased to 44.1 from 48.1. The deterioration reflected weaker assessments of personal finances, buying conditions and the economic outlook as fuel and other essential costs remained central to household concerns.
Inflation worries deepen
The survey reported that 57% of consumers spontaneously mentioned high prices eroding their personal finances, up from 50% in April. The University of Michigan said lower-income consumers and those without college degrees posted particularly large declines in sentiment, reflecting the greater weight of gasoline and essential goods in household budgets for those groups.
Inflation expectations also increased in the final May reading. Year-ahead inflation expectations rose to 4.8% from 4.7% in April, while long-run inflation expectations climbed to 3.9% from 3.5%. The latest long-run reading remained above the 2.8% to 3.2% range recorded through 2024 and above the 3.4% reading reported in February before the Iran conflict began.
Fuel costs shape outlook
The survey said consumers appeared concerned that inflation could spread beyond fuel prices and remain elevated over a longer horizon. It also reported sizable increases in long-run inflation expectations among independents and Republicans, while sentiment among Democrats was little changed from April. Independents and Republicans each reached their lowest sentiment levels of the current presidential administration.
The May data adds to a closely watched set of U.S. economic indicators as households continue to weigh wage growth, prices, borrowing costs and the cost of everyday purchases. The Federal Reserve monitors consumer inflation expectations because they form part of the broader inflation picture, alongside official price data, labor-market readings and business conditions.