In a surprise that many economists did not see coming, American consumers’ confidence has plummeted to near-record lows as economic anxiety reaches a fever pitch.
The University of Michigan’s consumer sentiment index dropped to 50.8 in May, the second-lowest reading ever recorded, with only June 2022 being worse.
Alarming new data, released this week, shows that sentiment fell from April’s already low reading of 52.2.
This devastating drop shocked economists, with the figure lower than all but one estimate in a Bloomberg survey.
Perhaps most concerning is the dramatic rise in inflation expectations, which have soared to multi-decade highs.
Year-ahead inflation expectations jumped to 7.3% from 6.5%, while long-term expectations climbed to 4.6% from 4.4%.
These figures represent the highest inflation expectations in decades, severely undercutting American families’ purchasing power.
Furthermore, the Federal Reserve is closely monitoring these inflation expectations, which could influence future interest rate decisions.
Recent inflation data has yet to show a significant impact from tariffs, with April’s consumer and producer price indices coming in below expectations.
Still, American consumers are not fooled by manipulated government statistics that fail to capture the true pain at the grocery store and gas pump.
Real families are struggling with skyrocketing costs for essential goods and services.
A final consumer sentiment index for May will be released on May 30, potentially reflecting changes due to the tariff pause.
Federal Reserve Chair Jerome Powell has said the Michigan inflation expectation numbers are an “outlier.”
Market-based measures of future inflation, which some Fed officials consider more important, have remained mostly stable.
Still, the steady rise in the Michigan survey’s inflation expectations could make it less likely that the Fed will cut its key interest rate anytime soon.
Lastly, without meaningful economic reforms that put America first, reinvigorate domestic manufacturing, and actually address the inflation crisis, American consumers will likely remain pessimistic about their economic future.
