Consumer sentiment fell in May to the lowest level in about five months, and expectations for inflation rose — bad signs for the economy and President Joe Biden.
The University of Michigan Consumer Sentiment Index dropped to 69.1, slightly less of a decline than forecasters had anticipated. But that marks a 10.5% drop in sentiment over the past month alone. The last time sentiment was this low was in November 2023.
Year-ahead consumer sentiment expectations also fell off. The index for consumer expectations plunged to 68.8 in May, from 76 in April.
Pre-pandemic, year-ahead inflation expectations have typically fallen within the 2.3-3.0% range, but in May, they rose to 3.3%.
Survey director Joanne Hsu said that the year-ahead outlook for business conditions saw a “particularly notable decline” in May.
“Consumers expressed particular concern over labor markets. They expect unemployment rates to rise and income growth to slow. The prospect of continued high interest rates also weighed down consumer views. These deteriorating expectations suggest that multiple factors pose downside risk for consumer spending,” Hsu said.
