U.S. consumer sentiment hits record low

The University of Michigan’s consumer sentiment index fell to 44.8 in May, the lowest reading in the survey’s history, according to final results released on May 22. Reuters reported the drop reflected surging gasoline prices linked to the Iran war and broader affordability worries. Joanne Hsu, director of the university’s Surveys of Consumers, said cost-of-living pressure remained a “first-order concern” for households. The decline extended a three-month slide in confidence and pushed sentiment below the prior trough set in June 2022. ### How low did the reading actually go? The 44.8 reading was down from 49.8 in April and below the preliminary May estimate of 48.2, according to the University of Michigan survey. Reuters said the final figure marked an all-time low for the series. The survey’s current conditions index fell to 45.8, while the expectations index dropped to 44.1. (money.usnews.com) The survey dates to 1952, and outside data carried by the St. Louis Fed show the index is widely used as a gauge of household views on personal finances and buying conditions. The May reading put sentiment below the June 2022 low cited by the university in its release. ### What did households say was driving the drop? Joanne Hsu said 57% of consumers spontaneously mentioned high prices were eroding their personal finances, up from 50% a month earlier. (money.usnews.com) The university said supply disruptions in the Strait of Hormuz had continued to lift gasoline prices, adding to pressure on lower-income households and consumers without college degrees. Reuters said the jump in fuel costs intensified anxiety over worsening affordability. (fred.stlouisfed.org) CNBC reported consumers were also worried that higher fuel costs would spread to other prices across the economy. Spectrum Local News, citing the same survey, said respondents feared those effects could persist over the long run. ### Why does this matter beyond one survey release? (sca.isr.umich.edu) Reuters said the weak reading highlighted dissatisfaction with the economy even as the labor market remained relatively resilient. The survey also showed sentiment among Republicans and independents fell to the lowest level of President Donald Trump’s second term, according to Reuters. Inflation expectations increased in the May report, adding to concern about future household spending. (cnbc.com) The University of Michigan survey is closely watched because consumer attitudes can influence spending, which drives most U.S. economic activity. Reuters said the deterioration in sentiment came as households faced higher fuel costs and broader worries about living expenses. (money.usnews.com) ### What does it mean for local consumer-facing businesses? Los Angeles restaurants, salons, fitness studios and boutique retailers sell into that same consumer mood, and the pressure usually shows up first in more selective spending. The source briefing for this story said businesses facing cautious customers are shifting toward marketing tied to transactions, including offers, testimonials, menu explainers, service walk-throughs and FAQ clips. (money.usnews.com) That is an inference drawn from the survey’s record-low reading and the briefing’s account of how local businesses respond to weaker confidence. The same briefing said tighter confidence can also make small businesses more conservative with marketing budgets, favoring packages that stress efficiency — one shoot day, multiple assets, and faster-turn promotional content. Those judgments come from the briefing material provided for this story rather than a new public filing or government release. ### What comes next in the data? The University of Michigan published its final May survey on May 22 after releasing a preliminary estimate earlier in the month. (money.usnews.com) The next update will come with the June consumer sentiment release on the university’s regular survey schedule. Reuters and the university both said the May report will also feed into debate over inflation expectations and household spending in the weeks ahead.