UMich consumer sentiment survey nosedives in May

May 18, 2015

ANN ARBOR (5/18/15)--The University of Michigan’s consumer sentiment survey took an unexpected turn for the worse in May, crumbling by 7.3 points to 88.6, the largest drop in two years ( May 15).

The current conditions subcomponent dropped by 7.2 points to a six-month low, as only 39% of respondents said their personal finances were better now than they were a year ago, down from 47% the prior month.

Further, 32% said they were in worse financial shape than a year ago, a 5% increase.

“First-quarter weakness may also be bleeding into shoppers’ perceptions of current finances,” said Nate Kelley, Moody’s analyst ( May 15). “To be sure, employment missed expectations in the first quarter for many of the same reasons growth slowed in the beginning of 2014.”

Thirty-two percent of respondents reported that their income was higher than a year ago, down from 35%, while 26% said lower incomes have damaged finances, up from 22% the prior month.

Additionally, 14% said higher prices have contributed to their waning confidence over finances, the highest percentage since November.

Additional highlights:

  • Perceptions of present business conditions slipped during the month, as those who believe conditions have improved from a year ago fell to 54% from 63%, while 34% said conditions have worsened, compared with 29% in April;
  • Expectations for household finances changed marginally, with 35% saying they will be better off in a year’s time, down from 37%, while 13% said they will be worse off, unchanged from the month prior; and
  • Buyers forecast that prices will rise 2.9% over the next 12 months, the highest rate of expected inflation since October. Further, five-year inflation expectations climbed to 2.8% from 2.6%.