U.S consumer sentiments are at an all time low

Picture Credit: by Reuters

The numbers are in, and they are historic, in the worst possible way.

US consumer sentiment fell to an all-time low in May, dropping to 44.2 on the University of Michigan's closely watched index, shattering the previous record of 49.8 set just last month. The survey, which dates back to 1952, means Americans are now more pessimistic about their economic lives than at any point in modern history. Worse than the 1970s oil crisis. Worse than 9/11. Worse than the Great Recession. Worse than Covid-19.

The Iran war is the accelerant. With the Strait of Hormuz choked off for nearly three months, US gas prices are approaching all-time highs, and the cost of everyday essentials is climbing with them. Fifty-seven percent of consumers spontaneously cited high prices as directly eroding their personal finances, up from 50% just a month ago. Personal finances overall sank 13% in May alone.

The pain is not evenly distributed. The sharpest deterioration is among lower-income Americans and those without college degrees, the groups hit hardest when fuel and food prices surge. For them, record stock market highs offer no comfort. As chief economist Christopher Rupkey put it bluntly: "Most Americans have the money locked up in 401K retirement accounts that cannot be drawn on to make life easier now."

The inflation outlook is worsening too. Year-ahead inflation expectations ticked up to 4.8%, while long-term five-year expectations jumped sharply to 3.9%, levels not seen since tariffs were stoking price pressures late last year. Among Republicans, long-run inflation expectations are now more than double their February 2025 readings, a striking signal of eroding confidence even within the president's own base.

Three months ago, Americans were willing to wait and see how the Iran conflict played out. That patience, the data now confirms, has run out.