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

On Friday, the University of Michigan released the preliminary results of its Consumer Sentiment Index (CSI) for May.

• The Index of Consumer Sentiment declined to a reading of 67.4, down from 77.2 in April. This is a month-over-month decline of 12.7% but up 14.2% year-over-year (59.0 in May 2023).
• Current Economic Conditions dropped to a reading of 68.8, down from 79.0 in April. This is a month-over-month decline of 12.9% but up 5.7% year-over-year (65.1 in May 2023).
• The Index of Consumer Expectations fell to a reading of 66.5, down from 76.0 in April. This is a month-over-month decline of 12.5% but up 20.7% year-over-year (55.1 in May 2023).

In remarks and analysis prepared to accompany the report, Surveys of Consumers Director Joanne Hsu said:

“Consumer sentiment retreated about 13% this May following three consecutive months of very little change. This 10 index-point decline is statistically significant and brings sentiment to its lowest reading in about six months. This month’s trend in sentiment is characterized by a broad consensus across consumers, with decreases across age, income, and education groups. Consumers in western states exhibited a particularly steep drop. While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions. They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.

Year-ahead inflation expectations rose from 3.2% last month to 3.5% this month, remaining above the 2.3–3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations inched up, from 3.0% last month to 3.1% this month. Although they have been within the narrow 2.9–3.1% range for 30 of the last 34 months, long-run inflation expectations remain elevated relative to the 2.2–2.6% range seen in the two years pre-pandemic.”