Consumer confidence in May scored an 82.9 on the University of Michigan’s consumer sentiment index. While that represents an improvement over the same period last year, researchers say it’s about five points lower than the consumer outlook score in April.
Researchers say inflation concerns are the reason for the drop. The study finds that consumer expectations for overall price changes jumped from 3.4% to 4.6% last month.
“I think this raises the prospects that inflation will continue longer than many government officials now anticipate.” — Richard Curtin, University of Michigan
Richard Curtin is Surveys of Consumers Director at the university. He says it is the biggest rise in inflation concerns the study has found over the last 50 years.
“And it was firmly grounded in their experiences in their own economies,” says Curtin, “in terms of local home prices, vehicle prices and prices of large household durables.”
Curtin says with the economy still doing better than it was a year ago, people are more likely to buy products that have gone up in price. However, he says a strong outlook for jobs and income is likely to cover up any negative effects in the short term.
“I think this raises the prospects,” says Curtin, “that inflation will continue longer than many government officials now anticipate. But I don’t think this has the kind of legs to make it a new inflationary age.”
Economists say they expect to see strong consumer spending through the middle of 2022. Curtin says the impact of inflation could be felt over a five-year period.