Consumer sentiment in the United States has reached a concerning low as gas prices continue to surge, largely attributed to the ongoing conflict in Iran. According to the latest University of Michigan Survey of Consumers, the preliminary sentiment reading for early May dropped to 48.2, reflecting a 3.2% decline from April’s already low figure and a significant 7.7% decrease compared to the same month last year. Economists had anticipated a slightly more favorable result of 49.7.
The persistent fears surrounding inflation emerged as the main factor driving this downward trend. Joanne Hsu, the survey’s director, indicated that concerns over high prices affect both personal finances and the conditions for making substantial purchases. Notably, one-third of respondents identified gas prices as their primary worry, while another similar proportion pointed to tariffs related to trade policies initiated by the Trump administration, which have intensified following military actions in Iran and the announcement of new tariffs last month.
“Consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump,” Hsu remarked, further noting that improvements in consumer sentiment are unlikely until supply disruptions are resolved and energy costs begin to decline.
Despite the overall bleak outlook, the survey did reveal some modest areas of optimism. The expectations index, which gauges future sentiment, rose to 48.5, marking a 0.8% increase from April and a 1.3% improvement from the previous year. Additionally, the inflation outlook showed slight easing, with the one-year projection now at 4.5% and the five-year forecast at 3.4%, both down marginally from previous figures.
On the economic front, stock indexes maintained a positive trajectory following the survey’s release, coinciding with a report from the Bureau of Labor Statistics indicating stronger-than-expected job growth. Nonfarm payrolls increased by 115,000 in April, keeping the unemployment rate steady at 4.3%.
However, the impact of soaring energy prices remains palpable, as national gas prices have climbed to an average of $4.54 per gallon. This figure reflects a nearly 40 cents rise from just a month ago and an increase of nearly $1.40 from the same period last year, according to AAA.
