Americans are losing confidence in the economy at a record pace as rising gas prices, stubborn inflation and the rising cost of living leave many families feeling stretched month to month.
New figures released on Friday by University of Michigan showed US consumer sentiment fell to 44.8 in May, the weakest reading ever recorded by the survey and well below economists’ expectations.
The sharp drop comes as a war involving Iran is fueling new fears over global oil supplies, driving up gasoline prices just as millions of Americans prepare for summer vacations. For families already stretched by bills for groceries, rent, insurance and mortgage payments, the latest jump at the pump has become another expense that many can’t afford comfortably.
Even people with stable jobs are starting to feel less secure about their finances.
According to the survey, 57% of respondents automatically say the high cost of living is hurting their finances, up from 50% last month. The frustration is spreading beyond low-income households as many middle-class families struggle to keep up with rising debt.
For many Americans, everyday life feels more expensive than it did just a few years ago.
Filling up a car, buying groceries or planning a family trip now requires a bigger budget than ever before. Some consumers cut back on non-essential spending, while others rely heavily on credit cards just to keep up with regular habits.
Consumer spending keeps most of the US economy alive. When people start panicking and pulling back, businesses feel it quickly.
Retailers, restaurants, airlines and travel companies often see demand weakening first. Companies facing sluggish sales may delay hiring, scale back expansion plans or cut costs significantly if buyers remain cautious over the summer.
Americans still use it. But many are apparently very careful about where their money goes.
This study also showed that inflationary pressures are getting worse. Consumers now expect inflation to rise 4.8% over the next year, slightly above April’s reading, while long-term inflation expectations rose sharply to 3.9%.
If prices continue to rise, interest rates may remain painfully high for a long time as well – maintaining mortgages, car loans and credit card debt is expensive across the country.
Many Americans are already carrying record credit card balances while paying far more interest than they did just a few years ago. Rising mortgage rates are locking many buyers out of the housing market, especially young families trying to buy their first home.
The report comes at a difficult time for both financial markets and the White House.
Consumer spending remains one of the biggest trends hold the US economy despite persistent inflation and high borrowing costs. But if Americans begin to cut back hard in the coming months, fears about slow growth, weak employment and broader economic difficulties could spread quickly.
For millions of families, the economy may still be growing on paper. It doesn’t sound like that at the checkout line, at the gas pump or at the end of the month.
