inflation and interest rates hurt consumer confidence in May

U.S. consumer confidence deteriorated sharply in May, driven by inflation and rising interest rates, according to the final estimate of the University of Michigan survey released on Friday, confirming the preliminary estimate published in the middle of the month. The index thus lost 10.4% compared to April and fell to 58.4 points, its lowest level since August 2011. This drop is greater than what analysts had anticipated, who had forecast 59.1 points. Compared to May 2021, the drop is 29.6%. “This recent decline is largely explained by the persistence of negative opinions on the current conditions of purchase of houses and durable goods (used for at least three years and of which a part is financed on credit)“, underlined Joanne Hsu, economist in charge of this survey very followed by the markets.

Another downside factor:consumers’ outlook for the economy, primarily due to inflation concerns“, she explains. Price increases in the United States in March reached a 40-year high, before slowing down a little in April, according to the various measures of inflation. In detail, it is mainly expectations for the coming months that are deteriorating, losing 11.7% to fall to 55.2 points. The index measuring the perception of the current situation fell by 8.8%, to 63.3 points. “The pessimistic sentiment regarding inflation could be aggravated in the coming months by growing fears of recession“, warns Mahir Rasheed, economist for Oxford Economics, in a note.

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