US Consumer Sentiment Goes From Bad To Awful

If it’s a foregone conclusion, is it worth mentioning?

Probably not, but if that’s the standard, then quite a bit of what makes headlines every week isn’t actually newsworthy.

With that in mind, US consumer sentiment tumbled to a fresh decade low in early May. At 59.1, the preliminary print on the University of Michigan’s gauge missed estimates by a wide margin. Consensus expected 64.

The renewed slump came on the heels of a fleeting rebound in April. In percentage terms, May’s drop was the largest since the Delta wave.

Current conditions crumbled (to 63.6 from 69.4) as did expectations, which fell 10% MoM.

Notably, survey chief economist Richard Curtin was succeeded by Joanne Hsu this month. That may seem like a superfluous aside, but it’s not. Curtin was a fixture. In a statement, Matthew Shapiro, director of the Survey Research Center and the Lawrence R. Klein Collegiate Professor of Economics at the University of Michigan, called Curtin “a giant.” It’s not too much of a stretch to say Curtin is synonymous with consumer sentiment polling.

Michigan provost, executive vice president for academic affairs and Boston Fed chief-in-waiting, Susan Collins, lauded Curtin’s work, which she described as “critically important to business decisions and to the development of public policy.”

Hsu is a Fed veteran and with respect, her attempt at editorializing around the survey results didn’t quite measure up to her predecessor. She recapped the numbers, and that was about it. I’m sure she’ll find her muse soon enough considering the unprecedented nature of the macro circumstances.

The deleterious trend in perceptions of buying conditions for durables continued in May. In fact, buying conditions hit an all-time low (figure below).

The related question made its first appearance in the monthly surveys in 1978. The problem, obviously, is inflation.

Americans’ assessment of their current financial situation versus a year ago was bleak. The relevant measure dropped to the lowest since 2013, with more than one in three consumers citing inflation.

Not a single economist surveyed predicted a headline print lower than May’s preliminary reading. “Inflation remains [at] the forefront of consumers’ minds,” Hsu remarked.

The survey suggested around half of consumers see their incomes trailing inflation over the next year. The last time buying conditions for homes were as bad as they are now, mortgage rates were 16%.

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6 thoughts on “US Consumer Sentiment Goes From Bad To Awful

  1. I wonder what to make of these surveys. I recall responding to a a U of M survey back in the early 1980’s when I was in a somewhat downbeat mood. I don’t know when it was published and didn’t think to check if my mood had any effect on the markets.. But durable goods sentiment numbers are worse than 2008. Either everyone’s whining or we are in for the mother of all recessions. My money’s on the former.

  2. I responded to the U of M sentiment survey recently. Alas, I probably didn’t pull the numbers up any.

    I also happened across the U of M’s breakdown of sentiment by political affiliation. May 2022 Index of Consumer Sentiment is 76.1 for Democrats, 57.4 for Independents, 41.2 for Republicans. Similar pattern for Current Economic Conditions and Index of Consumer Expectations. I find that quite interesting.

    1. I too found that interesting, and went to the source ( ). The really interesting part (and oh too obvious) is the relationship of sentiment to party in power. The data are scant in the early times, but pretty clearly the sentiment is far more positive if your party is in power. Reagan (1984-5): Rep > Dem, Bush (2006,08): Rep > Dem (and dropping fast during the GFC), then a tie for the first couple months of Obama’s first term, at the depths of the market swoon, then a clear shift to Dem > Rep for the next eight years until Trump: Rep > Dem, and finally in Dec 2020 with Biden: Dem > Rep. Obvious perhaps, but such remarkable fidelity for that record. Nothing unclear about the bimodal distribution of sentiment.

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