Views on the U.S. economy dropped again in May to another record low, according to a widely tracked survey by the University of Michigan, which warned that further ceasefire talks with Iran are unlikely to boost optimism unless surging gas prices cool.
Consumers still feel “buffeted” by rising costs brought on by the Iran war, including “soaring prices at the pump.”
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The University of Michigan’s consumer sentiment reading, a monthly survey of Americans’ views on the economy, dropped to 48.2 in May from a previous record low of 49.8 in April.
Values below the survey’s historical benchmark of 100 correspond with growing pessimism among Americans, and any reading above—which last occurred in 2018—suggests broader optimism.
Survey interviews were completed between April 21 and May 4.
About one-third of respondents mentioned gas prices and 30% mentioned President Donald Trump’s tariffs, survey director Joanne Hsu said in a statement. “Consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump,” Hsu said, adding, “Middle East developments are unlikely to boost sentiment until supply disruptions have been fully resolved and energy prices fall.” Americans’ views of their current financial situation fell to their lowest level since 2009, while the survey’s expectations index—how optimistic consumers are about the economy and their finances over the next several months to a year—rose slightly to 48.5. Inflation expectations also eased, as consumers anticipate costs rising 4.5% over the next year and 3.4% over the next five years, down from earlier projections of 4.7% and 3.5%, respectively.
The average price for a gallon of gas in the U.S. surpassed $4.50, a first since July 2022, according to AAA data. Gas prices are highest in California, where a gallon of gas averages at $6.16.
Americans have soured on the economy over the last year as costs rose in response to Trump’s sweeping tariffs, and again earlier this year after the U.S. struck Iran. Inflation rose by nearly a full percentage point in March, the largest single-month gain since April 2021, as fuel oil costs surged by 44.2% annually and gas prices rose nearly 19%. The Bureau of Labor Statistics tracked a roughly 11% monthly increase in prices across the energy sector, its largest since 2005. Nationwide chief economist Kathy Bostjancic warned last month that, should the U.S. and Iran continue peace talks, it could still take months for oil, gas, diesel and other energy commodity prices to “snap back” to pre-war levels.
Even as consumer sentiment fell to a new low, the U.S. job market showed signs of health: The economy added 115,000 nonfarm jobs in April, the Bureau of Labor Statistics reported Friday. That nearly doubled expectations of 65,000 new jobs and matched the pace of the 185,000 jobs added in March, which marked a turnaround from the 156,000 shed in February. While the labor market appeared to be steady, total employment dropped to 162.6 million, the lowest level since December 2024, suggesting just 0.6% employment growth.
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