U.S. consumer confidence fell to a new record low in May as worries over rising prices, driven by the ongoing U.S.-Iran conflict and surging oil costs, weighed heavily on households, according to surveys conducted by the University of Michigan. CNBC reported the data on Friday.
The Consumer Sentiment Index dropped to 44.8, down from a preliminary reading of 48.2 and sharply below April’s 49.8.
“Consumer confidence has declined for the third consecutive month amid continued supply disruptions in the Strait of Hormuz pushing gasoline prices higher,” said Joan Hsu, director of the consumer surveys. “Confidence now approaches the previous historic low recorded in June 2022.”
Hsu added that consumers are increasingly concerned that inflation will rise beyond fuel prices, with long-term impacts on household budgets.
Reflecting these concerns, one-year inflation expectations rose to 4.8% from 4.7% last month, a substantial increase from February’s 3.4% prior to the outbreak of the war. Longer-term inflation expectations climbed to 3.9% from April’s 3.5%.
Global markets have seen heightened volatility as investors monitor the conflict and anticipate prolonged higher oil prices. Yields on 30-year U.S. Treasury bonds reached their highest levels since before the financial crisis, while 10-year Treasury yields touched highs not seen in over a year.
In this context, the Federal Reserve signaled that it is less likely to lower interest rates in the near term. Fed Governor Christopher Waller noted Friday, “Although long-term inflation expectations remain relatively low and appear stable, some 1- to 5-year expectations have risen since the start of 2026, which I find concerning.”
The data underscores the complex challenges facing policymakers as they navigate inflationary pressures, geopolitical risks, and financial market volatility.
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