U.S. University of Michigan consumer confidence unexpectedly fell sharply short of expectations in May, falling sharply from April to a six-month low. Short-term inflation expectations for consumers in the country have risen sharply, from 3.2% last month to 3.5% latestly, and long-term inflation expectations have also risen.
The preliminary value of the University of Michigan consumer sentiment index in the United States in May was 67.4, a six-month low, significantly lower than the expected 76.2, and far lower than the previous value of 77.2 in April. The consumer confidence reading was below all economists in the media survey and fell short of expectations to a record extent. The University of Michigan consumer confidence fell by as much as 9.8 points this month, the biggest drop since August 2021.
The sub-indices fell sharply short of expectations across the board: the preliminary value of the University of Michigan Consumer Condition Index in May was 68.8, the forecast was 79, and the previous value was 79, and the preliminary index was 66.5, the forecast was 75, and the previous value was 76. Both sub-figures were six-month lows.
In terms of inflation expectations, the preliminary 1-year inflation expectation was 3.5%, the highest level in six months, significantly higher than the expected 3.2%, and the previous value was 3.2% in April; The preliminary 5-year inflation forecast of 3.1% was also higher than the forecast of 3% and the previous reading of 3% in April.
The University of Michigan report also shows that people's assessment of the conditions for buying durable goods fell to a one-year low. In addition, consumer perceptions of their finances and the short- and long-term outlook for the U.S. economy declined in May.
According to the analysis, consumers are worried about inflation and the job market, so confidence has fallen significantly. Sentiment has generally declined across age, income and education groups, reflecting heightened concerns about high interest rates. While the U.S. labor market drove economic growth last year, the pessimism highlighted in the Michigan report adds to the evidence of a slowdown in the U.S. economy.
Joanne Hsu, director of surveys for Michigan Consumer Sentiment Data, said in a statement:
Strong household incomes have been the main source of support for strong consumer spending over the past few years, so the weakness in labor market expectations is a concern, and if this continues, it could lead to a pullback in consumer willingness to buy.
To make matters worse, consumers expect the pain to continue, as interest rate expectations deteriorate sharply this month. Only a quarter of consumers expect interest rates to fall in the coming year, up from 32% in April.
U.S. stocks moved lower after data showed a significant rise in short-term inflation expectations in the U.S., and short- and medium-term Treasury yields expanded slightly, according to Michigan data:
- The U.S. two-year Treasury yield extended its gains to 2.7 basis points, reaching a new daily high of 4.8445%. The yield on the three-year Treasury note rose 3.3 basis points to a new daily high of 4.6551%. The yield on the five-year Treasury note rose 3.5 basis points, updating its daily high. The yield on the seven-year Treasury note rose 4.2 basis points, a new daily high. The yield on the 10-year Treasury note rose 4.2 basis points, a new daily high. The 30-year Treasury yield rose again to more than 2.5 basis points, approaching the daily high of the premarket rise in U.S. stocks.
- The S&P 500 rose more than 0.3% during the day, the Dow rose 160 points, or 0.4%, and the Nasdaq rose 0.28%. However, US stocks have since pared gains, with the S&P 500 and Nasdaq turning lower intraday.
- Spot gold maintained a gain of about 1%, trading at $2,370 an ounce, and U.S. stocks rose to a daily high of $2,378.46 in pre-market.
Consumer confidence is influencing economic growth in the coming months. Pessimistic consumer sentiment will dampen spending levels and thus affect the economic recovery, while optimistic consumer sentiment will help the economy going forward.
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