Consumer sentiment plummeted to a record low in early May, primarily driven by surging gasoline prices and persistent inflation fears, according to a University of Michigan survey.
Key Findings from Consumer Survey
The University of Michigan's Survey of Consumers released a preliminary reading of 48.2. This figure represents a significant decline:
- Month-over-Month: Down 3.2% from April's reading.
- Year-over-Year: Down 7.7% compared to the previous year.
Economists surveyed by Dow Jones had anticipated a reading closer to 49.7.
Drivers of Declining Sentiment
Survey director Joanne Hsu attributed the dip in consumer attitudes to sustained cost pressures impacting both personal finances and major purchasing decisions. The primary concerns cited by respondents included:
- Gas Prices: One-third of respondents identified rising fuel costs as their biggest concern.
- Tariffs: Another third cited tariffs, linked to actions by President Donald Trump, which included an attack on Iran in late February and the announcement of tariffs in April 2025.
According to Hsu, "Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall."
Mixed Signals in Expectations
Despite the overall negative trend, the survey noted some minor upticks in specific indices:
- Expectations Index: This index showed a slight improvement, rising 0.8% from April and 1.3% year-over-year, reaching 48.5.
- Inflation Outlook: The inflation outlook eased slightly, though projections remain elevated:
- One-year projection: 4.5% (down 0.2 percentage points).
- Five-year projection: 3.4% (down 0.1 percentage point).
