Consumers haven’t felt this bad about the economy since November

New York
CNN
 — 

Consumer sentiment plunged to the lowest level in six months as price increases reaccelerated, according to the latest University of Michigan survey of consumers, released Friday.

Additionally, consumers are bracing for even higher price increases in the year ahead compared to readings from prior months, the survey found.

The gauge, which is closely tracked by the Biden administration, plunged 13% from April’s 77.2% reading, to 67.4%. Economists polled by FactSet were expecting consumer expectations to fall to just 76.9%. However, the latest reading is still better than last May, when inflation was running at 4%, versus the latest reading of 3.5%.

Even though inflation is lower compared to a year ago, it’s been moving in the wrong direction recently, shifting expectations for a rate cut from the Federal Reserve to the back burner.

Perhaps the most daunting piece of the report for the Fed was year-ahead inflation expectations rising to 3.5% from 3.2% in April, even further away from the central bank’s 2% target. Long-run inflation expectations also rose, to 3.1% from 3.0% in April.

Since inflation expectations can effectively control the pace of price hikes, businesses take those expectations into account when pricing goods and services.

The survey suggests that the recent optimism consumers had about the state of the economy is waning. Beyond inflation, they’re also concerned about higher rates of unemployment, Joanne Hsu, the university’s Surveys of Consumers director, said in a release.

This is a developing story and will be updated.