High Inflation and Energy Pressures US Consumer Optimism
US consumer sentiment sank to an all-time low in May, driven by worsening inflation concerns stemming from the US-Iran war. The University of Michigan's final sentiment index released Friday (May 22) fell to 44.8, from 49.8 in April, weaker than all economists' forecasts and the preliminary reading of 48.2.
Long-term inflation expectations rose significantly, with consumers expecting prices to rise 3.9% annually over the next five to 10 years, the highest in seven months, while one-year inflation is projected at 4.8%. Gasoline prices, near their highest levels since 2022, further exacerbated cost-of-living concerns.
“The cost of living remains a top concern, with 57% of consumers citing high prices as a drag on their personal finances, up from 50% last month,” said Joanne Hsu, survey director. Nevertheless, consumer spending remains relatively strong, supported by a stable labor market and a rallying stock market.
The current conditions index fell to 45.8, while the expectations index fell to 44.1—both historic lows. Consumer perceptions of their personal financial situation also reached their lowest levels. The rise in long-term inflation expectations was particularly pronounced among Republicans and independents, who also recorded their lowest sentiment readings during Donald Trump's second term.
Factors to monitor: energy prices, developments in the US-Iran war, long-term inflation expectations, and implications for household spending. (Arl)*
Source: Newsmaker.id
