US Consumer Confidence Drops in May on Iran War Inflation
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- Conference Board consumer confidence index dropped to 93.1 in May from a revised 93.8 in April, coming in worse than the 92.0 economists had forecast.
- Gasoline prices have risen more than 50% since the war with Iran began in late February, disrupting Strait of Hormuz shipping and straining supply chains for oil and fertilizers.
- Households earning $15,000–$39,999 saw the sharpest confidence decline, disproportionately exposed to gasoline costs, while those earning above $100,000 stayed buoyed by a stock market rally.
- The share of consumers viewing jobs as 'plentiful' fell to its lowest level since February 2021, though the share saying jobs were 'hard to get' actually hit a seven-month low.
- Two-thirds of consumers reported cutting spending overall due to rising prices, delaying purchases of items they want rather than need over the next six months, per a Conference Board supplementary survey.
- Inflation has outpaced wage growth for the first time in three years, undermining the consumer spending that has otherwise held up via larger tax refunds and savings drawdowns.
- The darkening mood poses a political risk for Trump's Republican Party ahead of November midterm elections, as a Reuters/Ipsos poll showed his approval rating near its lowest point since returning to the White House.
Why it matters: The 0.7-point drop is small, but the pattern underneath is not: two-thirds of consumers are now cutting spending, lower-income households — those with the least buffer — are bleeding confidence fastest, and financial markets expect the Fed to keep rates in the 3.50%–3.75% range into 2027, removing a relief valve ahead of the November midterms.
