By Alice Seeley
Sentiment among American consumers declined in May to the lowest level in more than ten years. The final May reading of the index of consumer sentiment released on May 27 by the University of Michigan fell to 58.4, down 6.8 (10.4%) from the previous month’s reading. According to a Wall Street Journal survey, economists expected the gauge to stay at the preliminary estimate of 59.1.
“This recent drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers’ future outlook for the economy, primarily due to concerns over inflation,” Richard Curtin, director of the survey of consumers, said.
The gauge of current conditions fell to a 13-year low of 63.3, while the measure of future expectations dropped to 55.2 as Americans become more cynical of their short- and long-term economic outlooks.
Consumers expect prices to increase by 5.3% in May, down 0.1% from April. This is the first time that inflation expectations for the next 12 months have eased since December 2021. The data also revealed that Americans expect inflation to stay at 3% for the next five years. Despite all this, less than one-quarter of consumers predict they will be worse off financially a year from now, and most consumers expect their financial situation to improve over the next five years.
Although consumer confidence is at its lowest level in over a decade, Americans have not slowed down spending. Instead, consumer spending rose by 0.9% in April, marking a fourth straight month of gains, according to the U.S. Department of Commerce. According to Surveys of Consumers director Joanne Hsu, this increase was driven by consumers’ stable outlook on personal finances. However, “persistently negative views of the economy may come to dominate personal factors in influencing consumer behavior in the future,” said Hsu.
