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U.S. consumer sentiment weakened in May from a month earlier as inflation concerns picked up.
The University of Michigan’s final sentiment index dropped to 82.9 during the month from 88.3 in April, data released Friday showed. The figure was little changed from the preliminary reading and in line with the median estimate in a Bloomberg survey of economists.
The subdued reading reflects expectations of rising prices in the coming year. Respondents said they expect inflation to average 4.6 per cent in the next 12 months, the highest in a decade. As a result, consumers grew pessimistic about their financial prospects.
At the same time, they don’t expect higher price pressures to endure over a longer period of time. Consumers said they see three per cent annual inflation in the next five years.
“It is hardly surprising that the resurgent strength of the economy produced more immediate gains in demand than supply, causing consumers to expect a surge in inflation,” Richard Curtin, director of the survey, said in a report.
At the same time, “the impact of higher prices on discretionary spending will be offset by the more than US$2 trillion increase in savings in the past year as well as by improving job prospects,” Curtin said.
The gauge of current conditions fell to 89.4 in May from 97.2 a month earlier. A measure of expectations also declined, falling to 78.8 from 82.7.