Everything's Fine Update: Consumer Sentiment Tanks

Consumer sentiment fell in May to the lowest level in about five months, and expectations for inflation rose — bad signs for the economy and President Joe Biden.

The University of Michigan Consumer Sentiment Index dropped to 69.1, slightly less of a decline than forecasters had anticipated. But that marks a 10.5% drop in sentiment over the past month alone. The last time sentiment was this low was in November 2023.

Year-ahead consumer sentiment expectations also fell off. The index for consumer expectations plunged to 68.8 in May, from 76 in April.

Pre-pandemic, year-ahead inflation expectations have typically fallen within the 2.3-3.0% range, but in May, they rose to 3.3%.