May consumer sentiment expected to remain down in the dumps

We get the final report on consumer sentiment for May from the University of Michigan later today. The preliminary snapshot released earlier in the month was dismal — sentiment down from April, which was down from March — to levels not seen since the huge post-COVID inflation spike of 2022.

There’s a lot weighing on consumer sentiment right now: rising gas prices and utility bills, high interest rates, a tough labor market for new grads and other job-seekers.

But there’s also a conundrum here, one we’ve faced before: while sentiment has hit rock-bottom, spending remains strong, said Morning Consult economist Sofia Baig.

“As far as overall spending when it comes to gas prices, we haven’t seen an effect yet,” she said. “Consumers are absorbing the prices.”

And they’re not cutting back on discretionary purchases, “like travel, airfare, hotels, restaurants, recreation — which would include baseball games, movie theatres,” she said. “Those all have been increasing.”

Higher-income consumers are driving a lot of that spending. Lower-income folks, meanwhile, are just belted in for the ride, said Swarthmore College behavioral economist Syon Bhanot.

“They have no choice. You’re driving to work, you gotta’ fill your gas tank, you might get frustrated to see that price is higher, but what’re you gonna’ do about it?” he said.

With inflation rising, political strife at home, and geopolitical tensions abroad, Bhanot doesn’t expect sentiment to rebound any time soon.