It turns out Americans really don’t like soaring prices for gasoline and other essential goods.
A popular measure of consumer sentiment fell to a record low of 44.8 in May, according to data released by the University of Michigan on Friday. By comparison, the average reading for consumer sentiment over the last 20 years is 78.
“Consumer sentiment fell for the third straight month as supply disruptions in the Strait of Hormuz continue to boost gasoline prices,” Joanne Hsu, chief economist at the Surveys of Consumer Sentiment, said in a statement. “Sentiment is now just below the previous historical trough seen in June 2022. Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run.”
Survey respondents expect inflation to rise to 4.8% over the next year, a huge jump from the 3.4% inflation rate predicted in February, before the start of the war with Iran. Over the long run, consumers now expect inflation to rise to 3.9%, up from the 3.5% long-run reading in February.
Changing sentiments among Republicans and independents played a major role in the deteriorating outlook. Although the outlook for Democrats held relatively steady, the other groups registered more negative views, particularly on inflation. Hsu said that for Republicans and independents, “long-run inflation expectations are currently more than double their February 2025 reading on a monthly basis.”
Conflicting signs: The remarkably dour outlook comes at a time when stocks are sitting at all-time highs, and the labor market continues to hold up despite rising prices.
Christopher Rupkey, chief economist at FwdBonds, noted that inflation is more important day-to-day than the stock market for most Americans. “The American consumer is treading water here, and the income tax refunds must be gone already or the money spent on the higher prices seen everywhere in the economy,” he wrote in a note Friday, per CNN. “The stock market record highs are having no effect whatsoever on cheering consumers up which means most Americans have the money locked up in 401K retirement accounts that cannot be drawn on to make life easier now.”
Setting a record: The chart below from market strategist Charlie Bilello highlights the events that helped drive consumer sentiment to previous lows. Consumer outlook is now worse than it was during the brutal recessions of the early 1980s, the Great Recession of 2008-2009 and the pandemic-related inflation spike of 2022.
