Persistent inflation, rising energy costs and deteriorating consumer confidence are keeping households and policymakers on edge.
- Consumer sentiment has dropped sharply, reaching pessimism levels last seen when interest rates exceeded 15%, despite current rates being far lower.
- Preliminary May data from the University of Michigan shows sentiment declining further, indicating no improvement in consumer outlook.
- Consumers continue to cut back on big-ticket purchases and shift spending toward lower-cost discretionary items like dining out, streaming and pet services.
- Geopolitical tensions are pushing gasoline prices higher, weighing on consumer confidence.
- GDP in 1st quarter rebounded from a weak 4th quarter, supported by stronger government spending, AI-related investment and resilient consumer activity.
- Inflation remains elevated, with Personal Consumption Expenditures still running above the Fed’s target, limiting the likelihood of near-term rate cuts.
- April job growth per the Bureau of Labor Statistics totaled 115,000 jobs, with gains led by healthcare, transportation and retail, while federal employment declined.
- Unemployment held steady and wage growth continued, but real purchasing power is constrained by rising living costs.
- Housing starts surged to the fastest pace since late 2024, and new home sales exceeded expectations, driven in part by builder price cuts.
- Median new home prices fell to their lowest level since 2021 as builders discount inventory to sustain demand.
- Existing home prices declined for the ninth consecutive month, with over half of major markets posting annual decreases.
- Mortgage rates nearing 6.5% have dampened mortgage applications and slowed spring housing momentum.
For more information on the state of the U.S. Economy, including forecasts, watch all the episodes of the Economy Express series.
