The University of Michigan's consumer sentiment index plunged to 44.8 in the latest reading, marking the lowest level in the survey's history. The figure, released Friday, represents a sharp decline from the previous month's 58.4 and signals deepening pessimism among American households about the economy.
What the Index Measures
The monthly survey tracks consumer attitudes on personal finances, business conditions, and buying plans. A reading below 50 typically indicates negative sentiment. The new record beats the previous low of 50.0 set in June 2022 during peak inflation fears. The index has been collected since 1978.
Drivers Behind the Slide
Survey respondents cited persistent inflation, rising interest rates, and uncertainty about the job market as key concerns. The index's current conditions component — which gauges views on big-ticket purchases like homes and cars — also hit a historic low. Expectations for the next six months followed a similar downward trajectory.
Broader Economic Context
The drop comes as the Federal Reserve continues its campaign of rate hikes aimed at cooling the economy. Consumers are grappling with higher borrowing costs on credit cards, mortgages, and auto loans. Meanwhile, grocery and gas prices remain elevated despite some easing in overall inflation. The labor market, though still tight, has shown signs of softening with slower hiring in recent months.
The index is closely watched by economists and policymakers as a leading indicator of consumer spending, which accounts for roughly two-thirds of U.S. economic activity. A sustained slump could signal a pullback in spending, raising the risk of a recession.
Next month's reading will show whether the record low deepens or if sentiment stabilizes.
