Consumer sentiment at a low ebb; nearly half of Americans say they're worse off financially
The New York Fed’s monthly household survey shows the most pessimism since 2022 — and it lines up with the CPI print due Wednesday
Federal Reserve Bank of New York economists released the May edition of their Survey of Consumer Expectations on Monday, and the results paint the most pessimistic picture of the household economy since 2022.
The share of respondents who said their financial situation was “much worse” than a year ago jumped roughly 2.7 percentage points to 13.3 percent, the highest reading since July 2022 — itself a peak hit during the worst of the 2021-2022 inflation shock.
The combined “much or somewhat worse than last year” share reached 48.7 percent, the highest reading since January 2023, and the CBS News report on the same data put the number even more starkly: “nearly half of Americans now say they’re worse off financially” than a year ago.
Outlook for change not very encouraging
The forward-looking numbers in the survey are no friendlier. The share of consumers expecting their finances to be either much or somewhat worse in the year ahead rose to 36 percent; only 22.9 percent expect improvement.
The gap between those expecting better and worse outcomes is now at its lowest point since October 2022.
Household-spending growth expectations fell 0.4 percentage point from April. Rent-price expectations rose 1.74 percentage points; food-price expectations rose 0.58 percentage point; gasoline-price expectations actually fell 0.5 percentage point, the only category that softened. Year-ahead inflation expectations slipped 0.1 percentage point to 3.5 percent, while three-year expectations held at 3.1 percent and five-year at 3.0 percent — all stubbornly above the Federal Reserve’s 2 percent target.
That backdrop sets up Wednesday’s May Consumer Price Index, which arrives at 8:30 a.m. ET. CNBC’s writeup of the New York Fed survey pegged Dow Jones consensus at 4.2 percent year-over-year for headline CPI and 2.9 percent for core CPI excluding food and energy.
The Wall Street Journal flagged the same consensus, with core expected to rise from 2.8 percent in April to 2.9 percent in May. CBS News, citing FactSet data, put headline CPI consensus at 4.2 percent, which would mark the highest annual pace of inflation in three years.
Federal Open Market Committee meets June 16-17, and market expectations indicate a near-zero probability of a rate cut, with growing odds the central bank may instead deliver a quarter-point hike before year-end.
Small-business optimism is back to its October 2024 low, erasing nearly all the post-election bounce
A second data point from Tuesday morning reinforced the household survey. The National Federation of Independent Business reported its Small Business Optimism Index fell 0.6 point in May to 95.3, the lowest reading since October 2024 and a near-total erasure of the post-election rally that had carried the index to a six-year high of 105.1 in December 2024.
The Wall Street Journal’s report on the same release confirmed the figure. The 95.3 May reading sits below the index’s long-term average of 98 — a threshold the NFIB describes as the line separating expansion-leaning small business sentiment from contraction-leaning.