The University of Michigan's preliminary consumer sentiment index fell to 48.2 in May from 49.8 in April, lower than the expectations for a smaller decrease to 49.5 in a survey compiled by Bloomberg.
The current conditions index decreased to 47.8 in May from 52.5 in April, while the expectations reading rose to 48.5 from 48.1.
Michigan said cost pressures, led by soaring gasoline prices continue to be a major concern for consumers.
"Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall," Michigan noted.
Respondents saw one-year inflation expectations at 4.5%, down from 4.7% in April, while five-year inflation expectations fell to 3.4% from 3.5%.
The twice-monthly Michigan Sentiment index measures consumer sentiment early in the current month (the preliminary estimate) and is then revised later in the month (the final estimate). The headline index is a combination of the current assessment and expectations for the near future.
An increase in the reading suggests consumers are more confident, a positive for stocks if that confidence translates into spending. Increased demand is usually inflationary, a negative for bonds.