Consumer sentiment falls to fresh record low in May as surging gas prices hit outlook

Gas prices have been on the rise due to tensions in the Middle East, specifically the Iran war, causing consumer sentiment to hit a new low in early May. According to a University of Michigan survey released on Friday, the Survey of Consumers posted a preliminary reading of 48.2, which is a 3.2% decrease from April’s record drop and a 7.7% decline from a year ago. Economists had anticipated a slightly higher reading of 49.7.

The primary driver behind the decline in consumer attitudes was inflation fears. The current conditions index also took a hit, dropping by 9%. Joanne Hsu, the survey’s director, attributed this trend to concerns about high prices for personal finances and major purchases. Gas prices were a major cause of concern for one-third of respondents, while tariffs imposed by President Donald Trump were cited by another one-third.

Despite the overall negative sentiment, there were a few positive points in the survey. The expectations index rose slightly to 48.5, and the inflation outlook showed a slight improvement, with the one-year projection at 4.5% and the five-year projection at 3.4%.

Following the survey release, stock indexes remained positive. This comes after the Bureau of Labor Statistics reported stronger-than-expected job creation in April, with nonfarm payrolls increasing by 115,000 and the unemployment rate holding steady at 4.3%. However, the soaring energy prices continued to be a concern, with the national average for a gallon of regular gas reaching $4.54, up nearly 40 cents from the previous month and almost $1.40 higher than a year ago, according to AAA.

Overall, consumers are feeling the pressure of rising costs, particularly in the energy sector. The survey suggests that sentiment may not improve significantly until there is a resolution to the supply disruptions in the Middle East and energy prices begin to fall. Stay informed with CNBC for all the latest updates on business news.