The University of Michigan's consumer sentiment index fell to an all-time low in May, driven by surging gasoline prices linked to supply disruptions in the Strait of Hormuz and deepening concern that inflation will spread well beyond fuel costs.
At 44.8, the final May figure marked a new record, sliding from 49.8 in April and coming in beneath the month's preliminary estimate of 48.2 — a drop of 10% from the prior month and 14.2% from a year earlier. Records were broken across the board: the current economic conditions gauge settled at 45.8 and the expectations component at 44.1, with each reaching its lowest point in the survey's history.
"The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month," Joanne Hsu, director of the university's Surveys of Consumers, said in a statement. "Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run."
On the inflation expectations front, the one-year outlook ticked up to 4.8% from April's 4.7%, while the longer-range measure — spanning five to ten years — jumped to 3.9% from 3.5%, a seven-month highg. Both readings are well above the 2.8% to 3.2% range seen throughout 2024.
Political views influenced the drop in sentiment. For independents and Republicans, confidence fell to its lowest level since the current administration began. Among Republicans, long-term inflation expectations have more than doubled since February 2025. Lower-income households and people without a college degree saw the biggest declines, showing they are more affected by rising fuel and everyday costs.
AAA data show that pump prices have topped $4.50 a gallon throughout the month, representing a gain of more than 50% from where they stood when the Iran conflict broke out in late February.
The May reading marks the third consecutive monthly decline in sentiment. The index has now fallen below the previous historical trough recorded in June 2022. With records stretching back to 1952, the Michigan survey has captured every major economic trauma of the past seven decades — and the current result is more pessimistic than any of them, including the 1970s oil shocks, the Great Recession, and the Covid-19 pandemic, according to CNN.
The May result extends a string of historically low readings that began earlier this year as the Iran conflict disrupted oil markets and pushed gas prices toward $4 per gallon. In April, every component of the index declined, with consumers citing the conflict as a direct cause of deteriorating conditions. Hsu had at the time expressed measured optimism that sentiment could recover once supply disruptions eased and gas prices moderated — a scenario that has not materialized.
For the Federal Reserve, the surge in long-run inflation expectations carries particular weight: Entrenched beliefs about future price growth can prompt households to pull spending forward and push for higher pay, setting off a wage-price spiral that validates the very fears driving it