U.S. consumer confidence fell for the month of May as Americans deal with high inflation rates, according to the latest data from the University of Michigan’s survey of consumer sentiment.
The index of consumer sentiment fell to 59.1 in May, down 9.4 percent from the previous month’s index value of 65.2, according to the preliminary results of the survey. When compared to May 2021, the index was down by 28.7 percent. The May 2022 reading is the lowest since 2013.
According to Joanne Hsu, the survey director, inflation remained at the “forefront” of consumers’ thoughts, with respondents mentioning it throughout the survey; whether it was questions regarding personal financial situations, buying conditions, or their outlook on the economy.
“Consumers’ assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36 percent of consumers attributing their negative assessment to inflation. Buying conditions for durables reached its lowest reading since the question began appearing on the monthly surveys in 1978, again primarily due to high prices,” Hsu said.
The median expected year-ahead inflation rate was registered at 5.4 percent, thus continuing to remain near a 40-year high for the third consecutive month. This is up from 4.6 percent in May last year.
The mean was “considerably higher,” which points to the fact that there is “substantial variation” in price changes in goods and services as well as household spending patterns, Hsu pointed out. Median long-term inflation expectations were at 3 percent.
The current economic conditions index for May was 63.6, down 8.4 percent from April and 28.9 percent a year back. The index of consumer expectations fell 9.9 percent month-on-month and 28.6 percent year-on-year.
The Michigan survey results come as the Consumer Price Index (CPI), a measure of inflation, rose by 8.3 percent in April according to data from the Labor Department. Though down from the March CPI of 8.5 percent, it is still at high levels.
Elevated inflation not only pushes up prices of products but also eats away at employee wage gains. Real average hourly earnings of Americans fell 0.1 percent in April compared to the previous month. On a yearly basis, there was a 2.6 percent fall in real earnings in April.
The U.S. Federal Reserve raised interest rates by 50 basis points this month in a bid to ease inflation. More hikes will be coming, the agency indicated.
“Inflation is much too high, and we understand the hardship it is causing, and we are moving expeditiously to bring it back down,” Fed Chairman Jerome Powell told reporters last week.
“Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings.”