Consumer sentiment declines to another new record low as Americans fret over Iran war

By Bryan Mena, CNN

Washington (CNN) — Consumer sentiment continued to decline this month, reaching a fresh record low as the war in Iran drags on, keeping energy prices elevated.

The University of Michigan’s latest consumer survey, released Friday, showed sentiment fell early this month to a preliminary reading of 48.2, the lowest on records going back to 1952. Sentiment had previously reached its lowest point just last month, below anything seen during the Great Recession, the pandemic, and the inflation surge afterward.

“About one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs,” said Joanne Hsu, the survey’s director, in a release. “Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump.”

“Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall,” she added.

Gas prices heavily influence people’s perception of the economy, and the national average price for a gallon of gasoline has been stuck above $4 for weeks. That’s because global energy prices have remained elevated as well, with the ongoing closure of the Strait of Hormuz, a key global passageway through which 20% of the world’s oil passes, along with various other commodities.

“In sharp contrast to investors, consumers feel miserable right now,” Oren Klachkin, financial market economist at Nationwide, wrote in an analyst note Friday. “It’s hard to see a path for sentiment to rebound at least until gasoline prices start coming down on a sustained basis.”

What a record low means for the economy

Still, record-low sentiment likely won’t translate into a pullback in consumer spending, which accounts for about two-thirds of the US economy.

Bouts of souring sentiment in recent years didn’t trigger weaker spending, such as in 2022, when inflation reached 40-year highs; and last year, when President Donald Trump announced sweeping tariffs.

A key reason why Americans haven’t cut back, despite feeling lousy about the economy: The US labor market’s resilience.

While hiring has downshifted compared to the robust post-pandemic years, layoffs haven’t risen more than usual, keeping a lid on the unemployment rate. New employment data on Friday showed that the unemployment rate held steady at 4.3% in April as employers added a stronger-than-expected 115,000 jobs that month.

While Americans continue to hold on to the jobs that allow them to spend, they are still likely modifying their purchasing behavior, especially with higher gas prices eating a bigger share of people’s paychecks and Trump’s tariffs making certain goods more expensive.

The Michigan survey’s measure of “Current Economic Conditions” plunged 9% in early May to a reading of 47.8, “owing to a surge in concerns about high prices both for personal finances as well as buying conditions for major purchases,” according to a release.

That’s already taking a toll on some companies: Whirlpool, a major appliances producer, missed analysts’ estimates in first-quarter earnings reported earlier this week. The company’s stock fell as much as 20% after the report.

In an interview with Yahoo Finance, Whirlpool CFO Roxanne Warner said demand for appliances has “reached recession-level lows,” pointing to low sentiment as a major reason why.

“The industry contracted about 7.4%,” she said. “These are levels that last time you’ve seen was in the great financial crisis.”

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