Consumer Sentiment sunk to another post-pandemic low in May as inflation and economic uncertainty weighed on the measure (see graph below). This widespread pessimism has caused many consumers to begin tightening their belts, as evidenced by a crop of poor earnings reports from major retailers such as Target, Kohls, Best Buy, and more. And given that consumer spending accounts for two-thirds of U.S. GDP, the economy is now in a vulnerable position as consumers scale back their purchases.
Another concern raised by the dismal Consumer Sentiment report is the fact that consumers view Buying Conditions for Houses as being the worst since 1982. Surging housing prices and mortgage rates have created a double whammy for affordability which has priced many potential buyers out of the market. Thus, if a lack of demand helps spur a downturn in this overextended housing market, the U.S. economy would almost certainly be destined for recession.
