U.S. consumer sentiment declined for the third consecutive month in May as rising gasoline prices and ongoing supply disruptions linked to the Strait of Hormuz weighed heavily on households.
The University of Michigan’s Index of Consumer Sentiment dropped 10% to 44.8 in May, slipping just below the previous record low recorded in June 2022.
The Current Conditions Index fell 12.8% to 45.8 and is down 22% year over year, while the Index of Consumer Expectations decreased 8.3% to 44.1.
Consumers increasingly expect business conditions to deteriorate over both the short and long term, citing a mix of pressures including rising costs, tariffs, uncertainty and the ongoing Iran conflict.
Concerns around the cost of living intensified during the month, with 57% of respondents spontaneously mentioning that elevated prices were damaging their personal finances, up from 50% in April.
Sentiment among independents and Republicans fell to the lowest levels seen during the current presidential administration, while Democrats’ views were largely unchanged.
“Earlier this year consumers may have reserved judgment about how long the Iran conflict would last,” said University of Michigan economist Joanne Hsu, director of the surveys told Chainstore Age.
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“Three months into the conflict, consumers appear to be worried that supply disruptions are unlikely to be resolved quickly. Moreover, consumers are clearly concerned that increases in gas prices will spread to other prices in the economy and that consequences may persist into the long run.”
Gas prices were a particularly prominent concern for respondents. According to Hsu, nearly 40% of consumers voluntarily referenced fuel costs during interviews this month, up from 33% in April.
“During interviews this month, nearly 40% of consumers offered unsolicited comments about gas prices, up from 33% last month, reflecting their importance in how consumers view the economy,” she said.
Personal finance perceptions also deteriorated sharply, falling roughly 13% in May.
Lower-income households and consumers without college degrees reported some of the steepest declines in both financial outlook and overall sentiment, groups that are especially vulnerable to higher transportation and fuel costs.
Hsu noted that gas prices have surged more than 50% since the beginning of the Iran conflict, adding further pressure to already strained household budgets.
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