Inflation Dispirits Consumers More Than Lockdowns Did

That’s how many months in a row a measure of consumers’ economic confidence has stayed below the dismal level it hit during the pandemic lockdowns of early 2020, another sign of how inflation is rattling people’s outlooks. 

Gallup's Economic Confidence Index fell in May to its lowest level since 2009, sunk by high gas prices, elevated inflation, declines in the stock market, and bad economic reports, the polling company said Tuesday. It was the third straight month that confidence in the economy stayed below the depths it hit in April 2020—a remarkable milestone given the havoc the pandemic’s onset wreaked on the economy.

Consumer confidence is an important signal for the economy’s future direction because the worse people feel, the less likely they are to make major purchases. And since consumer spending is the country’s major engine of economic growth, worsening consumer confidence could forecast a slowdown ahead. Economists have been watching for signs that the U.S. economy could be headed for a recession in the near future, dragged down by inflation, supply chain problems, and other woes.

Other recent measures of consumer confidence, including a report by The Conference Board on Tuesday, have showed sentiment slumping,  mainly because of inflation. However, the decreasing confidence has yet to dent consumer spending, since household budgets are being supported by a robust job market as well as savings built up during the pandemic, economists at Wells Fargo Securities noted.

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