Consumer Sentiment Plunges to Fresh Record Low Amid High Gasoline Prices
US consumer sentiment declined to a fresh record low in May as people fear that high gasoline prices could erode their purchasing power, University of Michigan said Friday.The main sentiment index tumbled 10% to 44.8 from last month. The consensus in a Bloomberg-compiled poll was for May's print to stay unchanged from a preliminary 48.2 estimate."Consumer sentiment fell for the third straight month as supply disruptions in the Strait of Hormuz continue to boost gasoline prices," Surveys of Consumers Director Joanne Hsu said. "The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month."Gasoline prices in the US have surged as the Middle East conflict pushed crude oil costs higher. Consumers apparently don't yet see an immediate relief as the Strait of Hormuz, the most important chokepoint for energy flows, remains largely shut due to the US-Israel war with Iran.The year-ahead inflation outlook increased to 4.8% this month from 4.7% in April, the University of Michigan survey showed. The five-year price growth outlook climbed to 3.9% from 3.5% a month ago.At their April policy meeting, Federal Reserve officials flagged the possibility of higher interest rates if the Middle East conflict dragged on and kept inflation above the 2% goal, minutes from the meeting showed on Wednesday.The gauge for current economic conditions fell to 45.8 in May from 52.5 in April, while the expectations measure declined 8.3% to 44.1, the University of Michigan reported."Lower-income consumers and those without college degrees posted particularly strong sentiment declines; these groups are more sensitive to increases in the cost of gas and other essentials," Hsu said. "Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run."