Consumer Sentiment Sours In May, Warning Sign For Biden

The University of Michigan index of consumer sentiment saw its biggest drop since 2021 in May - dropping to a six-month low - reflecting consumer concerns over inflation and rising prices.

• The Washington Post notes: "The economy, while still remarkably strong, has slowed in recent months as the Federal Reserve tries to get inflation under control. Employers are adding fewer jobs, wage growth has decelerated, and Americans are holding off on big purchases like homes, cars and washing machines."
• Jeffrey Roach, chief economist for LPL Financial said: “For the last couple of years, the economy has been driven by household spending and now people are starting to say, ‘Let’s retrench here. The pressure from inflation has finally started to hit even upper-income households.”
• The shifting sentiment is a warning sign for President Biden as the White House economic message - largely driving by positive data - has failed to resonate with voters facing persistently high prices.
• Celinda Lake, a Democratic pollster, noted the particualr concern of gas prices which have risen by roughly 50 cents per gallon since the start of the year on average: “People tend to know the cost of gas, block by block, and they deeply resent it when gas prices go up right before summer vacation.”

Figure 1: Index of Consumer Sentiment

Source: Washington Post/ University of Michigan