Reflecting the collapse of U.S.-China trade talks, the University of Michigan released a report on Friday showing a bigger than expected downward revision to its reading on U.S. consumer sentiment in the month of May.
The report said the consumer sentiment index for May was downwardly revised to 100.0 from the preliminary reading of 120.4.
The index remains notably higher than the final April reading of 97.2 but came in below economists for a reading of 101.5.
“Although consumer sentiment remained at very favorable levels, confidence significantly eroded in the last two weeks of May,” said Surveys of Consumers chief economist Richard Curtin
He added, “The late-month decline was due to unfavorable references to tariffs, spontaneously mentioned by 35% of all consumers in the last two weeks of May, up from 16% in the first half of May and 15% in April and equal to the peak recorded last July in response to the initial imposition of tariffs.”
The report said the current economic conditions index fell to 110.0 in May from 112.3 in April, while the index of consumer expectations surged up to 93.5 from 87.4.
On the inflation front, one-year inflation expectations jumped to 2.9 percent in May from 2.5 percent in April after five-year inflation expectations climb to 2.6 percent from 2.3 percent.
“While higher inflation expectations modestly reduced real income expectations, the largest impact was on buying conditions for appliances and other large household durables, which fell to their lowest level in four years,” Curtin said.
He added, “The combination of higher inflation and a slower pace of spending provide conflicting signals for monetary policy.”
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