On Friday, a report from the University of Michigan revealed a significant decline in U.S. consumer confidence in May. According to the university, its consumer sentiment index plummeted to 67.4 in May, down from 77.2 in April, which is a sharper decline than the anticipated adjustment to 76.0.
This unexpected plunge takes the consumer sentiment index to its lowest level since it reached 61.3 last November. Joanne Hsu, Director of Surveys of Consumers, noted that while consumers had been withholding judgment for some time, they now perceive negative developments across various sectors.
Hsu pointed out, "Consumers expressed concerns about potential adverse shifts in inflation, unemployment, and interest rates over the next year."
The marked drop in the overarching index coincides with a dive in the current economic conditions index from 79.0 in April to 68.8 in May. Similarly, the index of consumer expectations dropped from 76.0 in April to 66.5 in May.
The report also underscored a significant increase in inflation expectations for the forthcoming year — soaring from 3.2 percent in April to 3.5 percent in May. This escalation marks the highest level of inflation expectations for the next year since it reached 4.5 percent last November.
Meanwhile, long-term inflation expectations experienced a minor growth of 0.1 percent, moving from 3.0 percent in April to 3.1 percent in May. This rate remains high compared to the 2.2-2.6% range observed in the two years prior to the pandemic.
