Consumer sentiment falls as inflation remains high

Consumer sentiment fell this month amid higher than expected inflation readings, according to the University of Michigan Surveys of Consumers. .The index for consumer sentiment fell 13 percent to 67.4, which is still 14 percent higher than 12 months ago. The index for current economic conditions fell 13 percent to 68.8 from 79 in April, but remains 6 percent higher than May 2023. The index of consumer expectations fell 12 percent to 66.5 from 76 in April but is still more than 20 percent higher on an annual basis. .Both year-ahead and longer-term inflation expectations remain higher than usual. Year-ahead inflation expectations increased to 3.5 percent this month from 3.2 percent in April, while long-term inflation expectations inched up to 3.1 percent this month from 3 percent in April. CPI inflation increased 3.5 percent over the past 12 months in March, up from 3.2 percent in February and 3.1 percent in January. ."This month's trend in sentiment is characterized by a broad consensus across consumers, with decreases across age, income and education groups," according to the report. "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. .Deteriorating economic sentiments were also reflected in April's The Conference Board Consumer Confidence Index. The index fell for the third straight month in April, to 97 from 103.1 in March. The index based on consumers' views of current business and labor market conditions fell to 142.9 from 146.8 in March. The index based on consumers' short-term outlooks for income, business and labor market conditions fell to 66.4 from 74 in March. A reading under 80 indicates an expected recession. ."Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income," said The Conference Board Chief Economist Dana Peterson. "Despite April's dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future."