American Consumers Have Never Been Less Confident Despite Inflation Fears Easing; UMich

With the "mini war" still ongoing (albeit with a 'ceasefire' in place), expectations were for a continued slide (already at record lows) in the American consumer's sentiment in preliminary UMich data for May released today.

And while the expectations were correct in direction, once again they underestimated just how bad things are as the headline UMich print fell from 49.8 to 48.2 (a new record low and below the 49.5 expectation).

Under the hood was more mixed with Current Conditions tumbling to 47.8 from 52.5 (new all-time low) while Expectations ticked up from 48.1 to 48.5 (better than expected).

Not a pretty picture with all three indices below 50.

Source: Bloomberg

The American Consumer has been less confident...

Overall, inflation expectations eased last month: Year-ahead inflation expectations softened a touch from 4.7% last month to 4.5% this month, and Long-run inflation expectations inched down from 3.5% in April to 3.4% in May.

The drop in inflation expectations is odd since all the underlying cohorts saw expectations rise?

The decline in headline sentiment was driven by a surge in concerns about high prices both for personal finances as well as buying conditions for major purchases.

Republicans are losing faith...

UMich Survey Director Joanna Hsu notes that real income expectations continued a decline that began in March.

About one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs.

Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump.

Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall.