Consumer Sentiment Crashes to Worst Level in Over 10 Years

American consumers feel lousy about the state of the economy and even worse about the prospects for the future.

The University of Michigan’s index of consumer sentiment fell to a final read of 58.4, 10.4 percent lower than the April reading of 65.2 and below the midmonth preliminary May score of 59.1.

Economists had expected that the index would hold on to its midmonth level and not decline further.

Consumers have been battered by record-high gas prices in May. The average price of gas made new records almost every day for the last two weeks, culminating at $4.60 a gallon on Thursday. A month ago, a gallon of gas averaged $4.134 in the U.S.

The Biden administration’s efforts to bring down gas prices and tame inflation have been largely ineffective, undermining public faith in the competence of current political leadership.

Consumer views on buying conditions for durable goods reached their worst level in May since the University of Michigan began asking about them in 1978. Home sales fell sharply in April due to high prices and rising interest rates.

“This recent drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers’ future outlook for the economy, primarily due to concerns over inflation,” said Joanne Hsu, the director of the consumer sentiment survey.

Expectations for inflation over the next year ticked down to 5.3 percent from 5.4 percent. On Friday, a key measure of inflation showed prices of goods purchased by U.S. households were up 6.3 percent compared with a year ago, down a bit from the 40-year high of 6.6 percent hit in March. The decline year-over-year figure, however, partly reflects the extraordinarily high level of inflation hit over a year ago, when inflation rose to a level not seen since the financial crisis.

Compared with a year ago, the University of Michigan Consumer Sentiment is down nearly 30 percent. Both the assessment of current conditions and the outlook are down by more than 29 percent, highlighting just how much inflation has dragged down the household sector’s view of the economy.