May 12 (UPI) — U.S. consumers are growing increasingly anxious about the economy as negative news persists on everything from the standoff over the debt ceiling to inflation, a survey from the University of Michigan found.
The Surveys of Consumers from the University of Michigan broadcast an index that shows mounting pessimism. The index of consumer sentiment for May was 57.5, down from 63.5 for April and 1.2% worse than this time last year.
Joanne Hsu, the director of the survey, said the month-on-month decline of 9% followed a 23% decline in optimism about the forward trajectory indicated in the university’s April report.
“While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” she said.
President Joe Biden and top congressional leaders postponed a second planned meeting on raising the debt ceiling that was expected on Friday, as the nation faces economic chaos if a deal isn’t reached by June.
The president has said he wants to raise the debt ceiling without any conditions and negotiate spending cuts as part of the national budget plan, while House Speaker Kevin McCarthy has continued to express frustration with Biden since the House passed a bill in April that would slash federal programs to raise the debt ceiling by $1.5 trillion over the next year.
The Congressional Budget Office on Friday said that if there’s no resolution, “there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.”
Should that happen, it would have profound ramifications for the global economy given the importance of the U.S. dollar in trade.
Elsewhere, while the price for all consumer goods dipped below 5%, after lingering around 9% last June, so-called core inflation, which strips out food and energy prices, remains stubbornly high at 5.5% annually.
Both measures are above 2% target rate set by the Federal Reserve, suggesting even more tightening may be needed to cool the economy.
“Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge,” Hsu added. “If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default.”