US consumer confidence declined in May and reached its weakest point since November 2023, according to a new report from the University of Michigan. The headline number – the preliminary May reading – came in at a disappointing 67.4, well below economists’ expectations in the 70s.
Consumer Confidence Crashes: Lowest Level in Months Raises Recession Fears
This significant decline paints a worrying picture of US consumers’ outlook on the economy. Both their assessments of current conditions and their expectations for the future fell short of forecasts, highlighting a growing sense of pessimism.
However, there was a silver lining (or perhaps a dark cloud, depending on your perspective). The report saw a slight rise in one-year inflation expectations, which rose to 3.5% – the highest level since last November.
While the University of Michigan acknowledges that consumer sentiment surveys can be volatile, the combination of declining confidence and rising inflation expectations could have serious implications. The Federal Reserve watches these surveys closely, and with inflation already a major concern, this latest data could lead to interest rate hikes aimed at curbing inflation.
This potential increase in interest rates, combined with weak consumer confidence, could slow economic growth and increase the risk of recession.
key takeaways:
- Consumer confidence fell to 67.4 in May, the lowest level since November 2023.
- Both current conditions and future expectations fell short of expectations.
- One-year inflation expectations rose to 3.5%, the highest since November 2023.
- Weakening consumer confidence and rising inflation expectations could lead to interest rates rising, potentially hindering economic growth.
