American consumer sentiment has never been lower. The University of Michigan's Consumer Sentiment Index plunged to 44.8 in its final May reading, the lowest since the survey began in 1952. The previous record low was 50.5 in June 2022.
Both subcomponents also hit historic lows: current economic conditions fell to 45.8, and expectations dropped to 44.1. One-third of respondents cited soaring gasoline prices as their top concern, with 30% blaming tariffs.
Survey director Joanne Hsu said consumers feel "buffeted by cost pressures, led by soaring prices at the pump." The anxiety is tied to geopolitical tensions in the Middle East, particularly the Iran conflict, disrupting energy markets.
Year-ahead inflation expectations ticked up to 4.8%. More concerning: long-run expectations climbed to 3.9%, nearly double the Fed's 2% target. This is the data point most likely to influence Federal Reserve policy.
Consumer spending drives two-thirds of U.S. GDP. When sentiment is this weak, spending typically follows within months. Investors should watch June's preliminary reading and whether long-term inflation expectations rise further.