High gas prices drove consumer sentiment down to a new low in May.
The University of Michigan’s Index of Consumer Sentiment dropped by five points during the month, to 44.8, according to the Surveys of Consumers’ final results for May.
The reading came a month after the 49.8 reading reported in April marked what was then the lowest level recorded in the over 73-year history of the Index of Consumer Sentiment.
Consumer sentiment has fallen for three consecutive months as gas prices have risen due to supply disruptions in the Strait of Hormuz, according to the report.
“The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month,” Surveys of Consumers Director Joanne Hsu said in the report.
There were particularly strong declines in sentiment among low-income consumers and those without college degrees, who are more sensitive to increases in the price of gas and other essentials, Hsu said.
By political affiliation, both independents and Republicans saw their sentiment decrease and reach the lowest levels of the current presidential administration, Hsu said. Sentiment among Democrats was little changed.
“Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run,” Hsu said.
The report found that consumers’ year-ahead inflation expectations inched up from 4.7% in April to 4.8% in May. In February, before the start of the Iran conflict, that figure stood at 3.4%.
Long-run inflation expectations rose from 3.5% last month to 3.9% this month. Hsu said this increase was driven by independents and Republicans.
The Conference Board’s most recent Consumer Confidence Index, which was released April 28, found that consumer confidence edged up in April despite higher gas prices.
However, in consumers’ write-in responses about factors affecting the economy, there were more comments about prices, oil and gas, and war in April than there were in March.
“Consumer confidence edged up in April but was overall little changed, despite material concern about rising gasoline prices as the war in the Middle East prompted a surge in Brent crude oil prices,” The Conference Board Chief Economist Dana M. Peterson said in a press release.
The Conference Board is set to release its next Consumer Confidence Index on Tuesday (May 26).
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