U.S. Consumer Sentiment Unexpectedly Improves In May

With stimulus checks improving consumers’ finances and widespread price discounting boosting buying attitudes, the University of Michigan released a report on Friday showing an unexpected improvement in U.S. consumer sentiment in the month of May.

The report said the consumer sentiment index rose to 73.7 in May after plummeting to 71.8 in April. The rebound surprised economists, who had expected the index to slip to 68.0.

The unexpected increase by the headline index came as the current economic conditions index jumped to 83.0 in May from 74.3 in April.

On the other hand, the report said the index of consumer expectations fell to 67.7 in May from 70.1 in the previous month.

“Personal financial prospects for the year ahead continued to weaken, falling to the lowest level in almost six years, with declines especially sharp among upper income households,” said Surveys of Consumers chief economist Richard Curtin

He added, “Improved views on buying conditions were due to discounted prices and low interest rates, although their impact was partially offset by uncertainties about job and income prospects.”

On the inflation front, one-year inflation expectations surged up to 3.0 percent in May from 2.1 percent in April, while five-year inflation expectations inched up to 2.6 percent from 2.5 percent.

Curtin called the jump in one-year inflation expectations “perhaps the most surprising finding” in the survey, noting there were “wide differences across age and income subgroups.”

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