U.S. Consumer Sentiment Falls in Early May; Inflation Expectations Surge -- University of Michigan
15 May 2021 - 12:45AM
Dow Jones News
By Xavier Fontdegloria
Consumers sentiment in the U.S. weakened in early May as
Americans' view on both current economic conditions and short-term
expectations worsened in the wake of higher expected inflation.
The preliminary estimate of the index of consumer sentiment
released Friday by the University of Michigan stood at 82.8 in May,
down from 88.3 in April. The reading missed expectations from
economists polled by The Wall Street Journal, who forecast the
indicator would increase to 90.1.
Consumer confidence tumbled due to the highest expected
year-ahead inflation rate as well as the highest long-term
inflation rate in the past decade, said Richard Curtin, the
survey's chief economist.
May's preliminary report showed a sharp in consumers' expected
inflation rate for the next year, which increased to 4.6% compared
with 3.4% in April. For the next five years, Americans expect
consumer prices to rise by 3.1%, up from the 2.7% registered the
previous month.
"Rising inflation also meant that real income expectations were
the weakest in five years," Mr. Curtin said. The average of net
price mentions for buying conditions for homes, vehicles, and
household durables were more negative than any time since the end
of the last inflationary era in 1980, he said.
The fall in May's consumer sentiment evaporated the gains
registered in April, with the indicator remaining well below
February's 2020's pre-pandemic level of 101.0. Sentiment should
improve further in the coming months as job growth picks up,
economists say.
Consumers' assessment of the current economic conditions fell to
90.8 in May from 97.2 in April. The index of consumer
expectations--which reflects the balance of respondents
anticipating improved business conditions in the next six
months--was down to 77.6 from 82.7 the previous month.
Consumer spending will still advance despite higher prices due
to pent-up demand and record saving balances, Mr. Curtin said.
The survey was conducted between April 28 and May 12. The final
reading for the month will be published on May 28.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
May 14, 2021 10:30 ET (14:30 GMT)
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