The U.S. economy appears to be growing rapidly, unemployment is sitting near historic lows, layoffs are almost nonexistent, and employers are adding hundreds of thousands of new workers to their payrolls.
But American consumers are not feeling any of it.
Consumer sentiment fell in recent weeks to a new record low on concerns about rising prices.
The preliminary May sentiment index dropped from the previous record low to 48.2 from 49.8 in April, according to the University of Michigan.
“While the expectations index inched up, current conditions fell back about 9 percent, owing to a surge in concerns about high prices both for personal finances as well as buying conditions for major purchases,” said Joanne Hsu, the director of the survey.
Consumers expect prices to rise 4.5 percent over the next year, down a bit from the April estimate of 4.7 percent. Long-run inflation expectations inched down to 3.4 percent from 3.5 percent.
Soaring gas prices are weighing on consumers. The national average has jumped above $4.50 cents per gallon, far above the $3.15 drivers were paying last year. In California, the average price is above $6.10.
“About one-third of consumers spontaneously mentioned gasoline prices and about 30 percent mentioned tariffs,” Hsu said. “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.”
In a troubling sign for Republicans, consumer sentiment among registered GOP voters dropped sharply. Independents also are less happy about both the current economic situation and the outlook for the future. Democrat sentiment actually improved from extreme lows, driven by an improvement in their outlook. That could reflect Democrat expectations of political gains in the midterm elections six months from now.
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