Consumer confidence plummeted in May in the United States, weighed down by growing concerns about the health of the economy but also by the debate over the debt ceiling and a possible default by the country. The index is down 9% from April, falling to 57.7 points, according to the preliminary estimate from the University of Michigan released Friday. Analysts had expected a weaker decline and saw the index sit at 62.9 points, according to the Briefing.com consensus.
Accumulation of bad news.
In fact, American consumers are facing a “proliferation of negative news about the economy,” Joanna Hsu, director of the survey, stresses in the press release. She mentions in particular fears of recession, but also, in the shorter term, the risks posed by “the stagnation of the debt crisis”, which could bankrupt the world’s largest economy.
In detail, the University of Michigan index that measures current conditions fell 5.4% to 64.5 points. But the one that measures expectations collapses 11.7%, to 53.4 points. And long-term inflation expectations have reached their highest level since 2011. Inflation fell slightly in April in the United States, to 4.9% annually from 5.0% in March, according to the CPI index published on Wednesday. However, over a month, it rebounded to 0.4% from 0.1% in March.
Record long-term inflation expectations
Democrats and Republicans are locked in a fight to raise the US debt ceiling, a necessary legislative move so that the world’s largest economy can continue to borrow and pay its bills, its officials and its creditors. A meeting is scheduled at the White House earlier this week.
Former President Donald Trump has urged Republicans to drop the threat of a default in order for Democrats to make “massive cuts” in spending. Without an agreement, the world’s largest economy would find itself, potentially as of June 1 according to the Treasury Department, in default, an unprecedented situation that could weigh heavily on the world economy.
Source: BFM TV
