Consumer sentiment hits fresh record low in May as Iran war fuels inflation worries
Consumer confidence fell to new record lows in May due to rising price fears due to the U.S.-Iran war and rising oil prices, University of Michigan Consumer Research said Friday.
The consumer confidence index fell to 44.8 from the initial reading of 48.2. It is also well below the 49.8 level seen at the end of April.
“Consumer confidence has fallen for the third consecutive month as supply disruptions across the Strait of Hormuz continue to drive up gasoline prices. Sentiment is now just below the previous historical low seen in June 2022,” Surveys of Consumers Director Joanne Hsu said in a statement. he said. “Critically, consumers appear concerned that inflation will rise and multiply beyond fuel prices, even in the long term.”
As a matter of fact, inflation expectations for the coming year increased from 4.7% last month to 4.8%. This is well above the 3.4% reading seen in February, before the war began.
Long-term inflation is expected to rise to 3.9% from 3.5% in April.
Markets around the world have been volatile lately as investors weigh how quickly the war might end and the consequences of long-high oil prices.
The yield on the 30-year Treasury note this week reached its highest level since before the financial crisis. The benchmark 10-year Treasury bill yield also reached levels not seen in more than a year.
The Federal Reserve has also signaled that it is less willing to cut interest rates due to inflationary pressures.
“While measures of long-term inflation expectations still appear relatively low and firmly anchored, some expectations one to five years out have risen since the beginning of 2026, and I find that concerning,” Fed Governor Christopher Waller said Friday.
