Consumer sentiment fell for a third straight month, reaching a record low in May. The Iran conflict is described as unnerving people and increasing concerns about inflation, with higher costs and elevated oil prices affecting households. Producer Price Index weakness contributed to stock declines earlier in the month. Trump’s approval on the economy has dropped, alongside the Consumer Sentiment index. When asked what messaging could improve sentiment, Kevin Hassett criticized the University of Michigan measure, saying it functions as a political survey. He claimed Democrats’ responses moved sharply with prior inflation conditions, while Republicans stayed steadier, and he cited a strong correlation between independents and Democrats’ answers.
"Meanwhile, consumer sentiment fell for the third straight month. In the month of May. It was at a record low of 44.8. The Iran conflict, unnerving people, fueling some worries about inflation as higher costs and elevated oil prices show up in people's pocketbook. What is the most important messaging that you can put out there for consumers to help sentiment here?"
"Well, they call it consumer sentiment, but I don't think those words mean what they think they mean anymore. We looked at the political affiliation of the people who are responding, and we found that at the peak of Biden's stagflation with inflation running out of control, that Democrats in the survey had a sentiment index that was way above 100. Right now they're at 30-something. And then Republicans have stayed relatively steady throughout."
"But we find that basically the consumer sentiment indicator at the University of Michigan. It's just a political survey. And in fact, the correlation between what independents say and Democrats say is 0.8 or 0.9. It is almost exactly, perfectly correlated. So what they have done is they have somehow devised a political survey that tells us how Democrats are feeling about things."
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