The University of Michigan’s consumer sentiment index fell to 44.8 in May, the lowest reading since the survey began in 1952.
Rising gasoline prices and fears of persistent inflation were major drivers behind the sharp decline in confidence.
Lower-income Americans and consumers without college degrees reported the steepest deterioration in sentiment.
Americans are feeling more pessimistic about the economy than at any point in more than seven decades, according to the University of Michigan’s latest Survey of Consumers.
The university’s closely watched Index of Consumer Sentiment dropped to 44.8 in May, down from 49.8 in April and below the preliminary May reading of 48.2. The latest figure marks the lowest level recorded since the survey began in 1952.
The survey found that concerns about the rising cost of living continue to dominate consumers’ outlook. According to the report, 57% of respondents spontaneously mentioned that high prices were hurting their personal finances, up from 50% a month earlier.
“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,” said survey director Joanne Hsu in commentary accompanying the report.
“Lower-income consumers and those without college degrees posted particularly strong sentiment declines; these groups are more sensitive to increases in the cost of gas and other essentials.”
Pain at the pump
Higher gasoline prices appeared to be a key factor behind the worsening mood. The survey noted that many consumers cited rising fuel costs and fears that inflation could spread beyond energy prices into other parts of the economy.
The report also showed growing anxiety about inflation expectations. Consumers now expect inflation to run at 4.8% over the next year, up slightly from 4.7% in April. Long-run inflation expectations climbed to 3.9%, well above the range seen throughout 2024.
Lower-income households and consumers without college degrees experienced some of the sharpest declines in confidence, reflecting the disproportionate impact of rising costs for essentials such as gasoline and groceries.
Political and demographic differences
The survey also revealed widening political and demographic differences. Sentiment among independents and Republicans fell to the lowest levels of the current administration, while Democratic sentiment was largely unchanged from April.
Economists say the record-low reading highlights the growing disconnect between how consumers feel and how the economy is performing. While sentiment has deteriorated sharply, consumer spending and employment data have remained relatively resilient in recent months.
Here’s the concern: Analysts warn that if consumers eventually pull back on spending, the overall economy could weaken. Consumer spending accounts for roughly two-thirds of U.S. economic activity.