U.S. consumer sentiment fell to a fresh all-time low in May as high gas prices, the cost of living and inflation worries tied to the U.S.-Iran war weighed on households, according to the University of Michigan's Surveys of Consumers. The index of consumer sentiment dropped for the third straight month to 44.8 from a preliminary reading of 48.2, and it was below the 49.8 level seen at the end of April. CNN reported the index fell to 44.2, below the previous record low of 49.8 set in April.
Who Pays for the Decisions at the Top
The people absorbing the blow are ordinary households, especially lower-income consumers and those without college degrees, while the machinery of war and the price system keeps grinding on. CNN said the U.S.-Israeli war in Iran and its subsequent oil supply crunch and price shocks worsened sentiment that already had been soured by years of high inflation and an affordability crisis. It said some of the sharpest declines in sentiment came from lower-income consumers and those without college degrees, and that increases in the cost of fuel and other essentials hit those groups particularly hard.
Joanne Hsu, director of the university’s Surveys of Consumers, said in a statement that "the cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month." She said consumers’ personal finances sank by 13% in May. Hsu also said, "Earlier this year, consumers may have reserved judgment about how long the Iran conflict would last. Three months into the conflict, consumers appear to be worried that supply disruptions are unlikely to be resolved quickly." She added that consumers were concerned high oil and gas prices would spread through the economy and make other goods and services more expensive.
What the Apparatus Calls Stability
The reports said gas prices were rising as the Strait of Hormuz, an important passageway for the shipping of oil and other critical goods, had been effectively choked off for nearly three months. CNBC said consumer sentiment tumbled as fears of higher prices grew due to the U.S.-Iran war and elevated oil prices. It said inflation expectations over the year ahead rose to 4.8% from 4.7% last month, well above the 3.4% reading seen in February before the war began, and that longer-term inflation was expected to rise 3.9%, up from 3.5% in April.
CNN said year-ahead inflation expectations edged higher to 4.8% from 4.7% in April and the five-year expected inflation rate jumped to 3.9% from 3.5%, with the near- and long-term expectations back at rates hit during the latter part of last year, when tariffs added to inflationary pressures. CNBC said the index of consumer sentiment fell for the third straight month and was just below the previous historical trough seen in June 2022. It quoted Hsu as saying, "Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run."
Markets, Rates, and the People Below
CNBC also said markets around the world had been volatile as investors weighed how soon the war could end and the ramifications of elevated oil prices for a long time. It said the 30-year Treasury bond yield this week hit its highest level since before the financial crisis, the benchmark 10-year Treasury note yield touched levels not seen in over a year, and the Federal Reserve had signaled it was less willing to lower rates amid the inflationary pressures. Fed Governor Christopher Waller said in a speech Friday, "While measures of longer-term inflation expectations are still relatively low and appear well anchored, some expectations from one to five years ahead have moved up since the beginning of 2026, which I find concerning."
CNN also said the University of Michigan’s sentiment survey dates back to 1952 and that Americans are feeling worse now than they did during wars, the 1970s oil crisis, 9/11, the Great Recession, the Covid-19 pandemic and the inflation surge afterward. The record low in May came after the previous record low of 49.8 set in April, extending a three-month slide in sentiment as households face the costs of war, fuel shocks and rising prices handed down from above.