The Public's Feelings About The Economy Hit Another Record Low

By

Diccon Hyatt

Full Bio Diccon Hyatt is an experienced financial and economics reporter. He's written hundreds of articles breaking down complex financial topics in plain language, emphasizing the impact that economic currents would have on individuals' finances and the market. He has a Bachelor's degree in English from the University of Delaware.

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Published May 22, 2026

11:21 AM EDT

Gas prices are pushing up the costs of every day items for Americans, making them more pessimistic about the economy. Alex Wroblewski / Bloomberg via Getty Images

Key Takeaways

• Consumer Sentiment fell to a fresh record low in May.
• The closure of the Strait of Hormuz has sent gasoline prices soaring toward record highs, amplifying longstanding discontent about consumer prices.
• Worryingly for the Federal Reserve, long-run inflation expectations shot up.

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As pessimistic as the public is about the economy and their own household finances, a new poll is a reminder that things can always get worse.

The University of Michigan's Index of Consumer Sentiment fell in May to a fresh record low, the university said Friday.1 The reading of 44.8 on the index was the lowest since the survey began in 1952, and below the 48.2 forecasters had anticipated, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.2

Sinking consumer confidence is likely a red flag about the impact of the Iran war on household finances and the economy. By cutting off traffic through the crucial Strait of Hormuz, the conflict has driven up prices for crude oil, gasoline, and other commodities.

Higher oil and gas prices have spilled over into other sectors, reigniting fears of another wave of inflation for consumers still reeling from pandemic-era price hikes that have never been reversed. The survey reflects a worsening of longstanding concerns among consumers about the cost of living.

What This Means For The Economy

The plunge of consumer sentiment to a fresh record low intensifies fears about the Iran war's energy crunch causing broader and longer-lasting economic damage than was anticipated at the outset of the conflict back in February.

"The cost of living continues to be a first-order concern," Joanna Hsu, director of the Surveys of Consumers program, said in a post accompanying the data. "Lower-income consumers and those without college degrees posted particularly strong sentiment declines; these groups are more sensitive to increases in the cost of gas and other essentials."

Gasoline, in particular, has been a sore spot for motorists entering the summer travel season. A gallon of regular gas averaged $4.55 nationwide heading into the Memorial Day weekend, according to AAA, up from $2.98 on Feb. 28 before the war began.3

However, if the U.S. and Iran fail to reach a deal to open the strait this summer, forecasters anticipate fuel prices will have much farther to rise and could easily break record highs.

Related Education

[Consumer Sentiment: Definition, Indicators, and Economic Impact

](https://www.investopedia.com/terms/c/consumer-sentiment.asp) [Wage-Price Spiral: What It Is and How It’s Controlled

](https://www.investopedia.com/terms/w/wage-price-spiral.asp)

Friday's survey also raised a red flag for officials at the Federal Reserve tasked with using monetary policy to keep inflation at a 2% annual rate.

Long-run inflation expectations rose to 3.9% in May for 3.5% in April, according to the survey. Fed officials keep a close eye on inflation expectations because economists believe they can become self-fulfilling prophecies. Workers who brace for future high inflation may demand higher wages, and businesses may raise prices to afford those wages—potentially setting off a vicious cycle of accelerating inflation.

Ahead of the survey, Fed officials had already been contemplating raising the central bank's benchmark interest rate to counter inflation, and Friday's survey could give ammunition to those policymakersarguing a rate hike should be on the table.

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• How does the Strait of Hormuz closure affect global oil supply?
• What are the Federal Reserve's tools to manage inflation?
• What are the ripple effects of rising energy costs on the economy?

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1. University of Michigan Surveys of Consumers. "Final Results for May 2026."
2. MarketWatch. "U.S. Economic Calendar."
3. AAA. "Fuel Prices."

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