The view of Americans of current economic conditions and the outlook for the future unexpectedly turned much grimmer in May, the University of Michigan’s barometer of consumer sentiment showed Friday.
The index of consumer sentiment crashed 12.7 percent to 67.4 in the preliminary May reading. Last month, the index had come in at 77.2.
Economists did not foresee the plunge in consumer sentiment coming. The consensus estimate was for a reading of 77, an insignificant dip from the prior month. The lowest estimate in the Econoday survey was 74.
The measure of consumer attitudes about the current state of the economy fell to 68.8 from 79 a month earlier. The gauge of expectations about the future fell to 66.5 from 76.
“Consumer sentiment retreated about 13% this May following three consecutive months of very little change. This 10 index-point decline is statistically significant and brings sentiment to its lowest reading in about six months. This month’s trend in sentiment is characterized by a broad consensus across consumers, with decreases across age, income, and education groups,” said Joanne Hsu, the director of the survey.
Expectations for inflation jumped higher. The year-ahead expectations rose to 3.5 percent from 3.2 percent in April. The long-run expectations rose to 3.1 percent from 3.0 percent.
“While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions. They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead,” Hsu added.