University of Michigan Reports Final Results of Its Consumer Sentiment Index for May

The University of Michigan on Friday (5-26-23) released the final results of its Consumer Sentiment Index (CSI) for May:

• The Index of Consumer Sentiment fell to a reading of 59.2 in May, down from a reading of 63.5 in April. This is a month-over-month decline of 6.8% but up 1.4% year-over-year (58.4 in May 2022).
• The Current Economic Conditions dropped to a reading of 64.9 in May, down from a reading of 68.2 in April. This is a month-over-month decline of 4.8% but up 2.5% year-over-year (63.3 in May 2022).
• The Index of Consumer Expectations fell to a reading of 55.4 in May, down from a reading of 60.5 in April. This is a month-over-month decline of 8.4% but up 0.4% year-over-year (55.2 in May 2022).

In remarks and analysis prepared to accompany the release of the final May CSI, Dr. Joanne Hsu, Director of Surveys for the University of Michigan, said:

“Consumer sentiment slid 7% amid worries about the path of the economy, erasing nearly half of the gains achieved after the all-time historic low from last June. This decline mirrors the 2011 debt ceiling crisis, during which sentiment also plunged. This month, sentiment fell severely for consumers in the West and those with middle incomes. The year-ahead economic outlook plummeted 17% from last month. Long-run expectations plunged by 13% as well, indicating that consumers are concerned that any recession to come may cause lasting pain. That said, consumer views over their personal finances are little changed from April, with stable income expectations supporting consumer spending for the time being.

Year-ahead inflation expectations receded to 4.2% in May after spiking to 4.6% in April. Uncertainty, as measured by the interquartile range of these expectations has been elevated, averaging 7.8 over the last 12 months, but fell this month to 5.7, the lowest level of uncertainty in almost two years. This suggests that consumer views over short-run inflation may be stabilizing following four months of vacillation. Long-run inflation expectations inched up for the second straight month but remained within the narrow 2.9-3.1% range for 21 of the last 22 months.”