US consumer sentiment crashes to all-time low in May as gas prices and inflation bite

US consumer sentiment collapsed to the lowest level on record in May, the University of Michigan reported on May 22, as relentless increases in gasoline prices and fears about inflation tied to the conflict with Iran crushed household confidence. The final reading of the Surveys of Consumers sentiment index fell to 44.8, down from 49.8 in April and far below the preliminary mid-month estimate of 48.2. It was the weakest figure since the survey began in 1952, eclipsing the previous trough of around 50.5 set during the inflation spike of June 2022.

The plunge marked the third straight monthly decline and was notable for breaking the all-time low in consecutive months, after April's reading had itself set a record. Both major components hit historic lows: the gauge of current economic conditions fell to 45.8, while the expectations index dropped to 44.1, reflecting deep pessimism about both households' present finances and their outlook for the future.

The cost of living dominated consumers' concerns. According to the survey, 57% of respondents spontaneously mentioned that high prices were eroding their personal finances, up from 50% the prior month. The University of Michigan tied the deterioration directly to the supply disruptions in the Strait of Hormuz, which have continued to push gasoline prices higher, compounding the squeeze on household budgets. Lower-income consumers and those without college degrees posted the steepest declines, reflecting their greater exposure to rising costs for fuel and other essentials.

Most worrying for policymakers was the behavior of inflation expectations. Consumers' year-ahead expectations for price increases edged up to 4.8%, while long-run expectations, which the Federal Reserve watches closely as a measure of whether inflation psychology is becoming unanchored, jumped to 3.9% from 3.5% in April. That long-run figure stood well above the 2.8% to 3.2% range that had prevailed in prior years and far above the level seen before the conflict began, suggesting households increasingly feared that elevated inflation could persist and spread beyond fuel.

The survey detail pointed to a broad-based loss of confidence. Year-ahead expectations for business conditions fell sharply and were running well below where they had started the year, while assessments across income, age and education groups deteriorated. The data underscored how the energy shock had filtered into the public's economic psychology, turning a supply-driven price spike into a more pervasive sense of financial strain.

For the Federal Reserve, the report cut both ways. On one hand, a consumer this gloomy raised the risk that spending could falter, which would argue for caution on policy. On the other, the rise in long-run inflation expectations was precisely the kind of development that tends to make central bankers more hawkish, since de-anchored expectations can become self-fulfilling. The combination reinforced the bind facing officials weighing an inflation surge against signs of fragility in demand.

Markets treated the release as confirmation of the strain building beneath the surface of an economy that, by spending measures, had still been holding up. While retail sales had shown consumers continuing to open their wallets, the sentiment data suggested they were doing so grudgingly and under pressure, with confidence in freefall even as outlays held.

The record-low reading captured the human dimension of the 2026 energy shock: regardless of the headline growth and jobs figures, households felt worse about their finances than at any point in the survey's seven-decade history. Whether sentiment could stabilize hinged largely on the path of gasoline prices and the conflict, leaving the mood of the American consumer, like so much else in the economy, hostage to developments in the Gulf.