US consumer sentiment plummets to 6-month low on inflation, unemployment fears
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US consumer sentiment took a significant hit in May, plunging to its lowest level in six months amid growing anxiety about inflation, unemployment and interest rates, a survey showed on Friday.
The University of Michigan’s consumer sentiment index, released Friday in a preliminary version, dropped to 67.4 this month from a final reading of 77.2 in April. That is still about 14 per cent higher than a year ago. Consumers’ outlook has generally been gloomy since the pandemic and particularly after inflation first spiked in 2021.
“While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions,” said Surveys of Consumers Director Joanne Hsu in a statement. “They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.”
The survey’s reading of one-year inflation expectations rose to 3.5% in May from 3.2% in April. Its five-year inflation outlook increased to 3.1% from 3.0% in the prior month.
Consumer sentiment has remained subdued since the onset of the pandemic, particularly after inflation spiked in 2021. This year, consumer price increases have remained elevated, hovering around 3.5% in March compared to the previous year.
Federal Reserve officials have reiterated their commitment to keeping interest rates at their current high levels until inflation returns to their 2% target, signaling a continued focus on addressing economic challenges.