Sugden Wealth Management

Inflation Fears Surge as Consumer Sentiment Plunges

The preliminary results from the University of Michigan’s consumer survey for May 2024 painted a concerning picture, with inflation expectations spiking higher even as overall consumer confidence took a significant downturn.

Key points:

  • The Consumer Sentiment Index plummeted to 67.4 in early May, down sharply from 77.2 in April – a 12.7% monthly decline.
  • However, consumers’ one-year inflation outlook surged to 3.5%, up from 3.2% in April and the highest level since November 2023.
  • The 5-year inflation outlook also increased to 3.1%, reversing a trend of lower readings in recent months and matching the high from November 2023.
  • The current conditions index dropped over 10 points to 68.8, while the expectations measure fell 9.5 points to 66.5, with consumers expressing worries about inflation, unemployment and interest rates moving in an unfavorable direction over the next year.

The divergence between crumbling consumer confidence and rising inflation fears poses a significant challenge for the Federal Reserve as it weighs the path forward on monetary policy.  The surge in near-term inflation expectations could potentially dampen consumer spending in the months ahead.

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