Full Breakdown
U.S. Consumer Confidence Stagnates Amid Rising Gas Prices and Inflation
5/28/2026, 6:04:54 AM
Core Findings: Confidence Index, Sentiment, and Spending
The Conference Board’s consumer-confidence index slipped 0.7 points to 93.1 in May, its first decline after three months of gains. By contrast, the University of Michigan’s consumer-sentiment index fell to a record-low 44.8, its third straight drop. A special survey question revealed that two-thirds of respondents are cutting back spending, mainly on discretionary items such as clothing, hobbies, toys and games. Gasoline averaged $4.49 per gallon, up from $2.98 before the Iran conflict, while April inflation rose to 3.8 %, the highest in three years.
Background: Iran Conflict and K-Shaped Recovery
The war in Iran, which has disrupted the Strait of Hormuz, lifted global oil prices and pushed U.S. pump prices above $4.50 for most of May. Economists describe the ensuing consumer pattern as a K-shaped recovery: higher-income households continue to spend on discretionary goods, while lower-income families reduce purchases as inflation outpaces wage growth.
Data Snapshot: Prices, Inflation, and Corporate Performance
- Gas price: $4.49 / gal (vs. $2.98 pre-war).
- Inflation (April): 3.8 % (Fed target 2 %).
- Adjusted hourly earnings: fell in April, the first decline in three years.
- Retail sales (inflation-adjusted): declined in April after a March rise.
- Abercrombie & Fitch: adjusted net income $1.47 per share, beating the $1.28 estimate.
- Bath & Body Works: adjusted profit $0.32 per share, above the $0.29 forecast.
- Geographic sales: Americas up 3 %, EMEA down 10 %.
Official Economic Perspectives
Yelena Shulyatyeva, senior U.S. economist at the Conference Board, linked the modest confidence dip to “limited layoffs” and a “low-hire, low-fire” labor market. Nationwide senior economist Ben Ayers noted that “the prospect of higher prices and faster inflation continues to loom over confidence readings.” National Economic Council director Kevin Hassett argued that rising gasoline spending “doesn’t diminish optimism” because “people are still very, very optimistic about the state of the economy.” Consumer Edge analyst Michael Gunther warned that “industry performance will be influenced by the persistence of higher gas prices, potential pricing pass-through, consumer sentiment and whether weak sentiment leads to a pullback in discretionary spend.”
Criticism, Political Fallout, and Public Sentiment
Polling shows 70 % of Americans expect a recession next year; 61 % report cutting groceries, and 59 % are postponing entertainment. 55 % of Republicans blame President Trump’s policies for higher living costs. Nate Silver’s aggregation places Trump’s approval for handling the economy at 34 %, with 63 % disapproval. Political scientist Chris Devine described economic attitudes as “stubborn,” noting that even if prices fall, voters may retain blame for the administration. Hassett’s dismissal of the University of Michigan’s sentiment index as “a political survey” contrasts with Gallup data showing only 16 % rate current economic conditions as good or excellent.
Conflicting Indicators & Gaps
The Conference Board’s relatively stable confidence reading conflicts with the University of Michigan’s record-low sentiment score, highlighting divergent methodological emphases on employment versus broader price concerns. Hassett’s claim that consumer optimism persists lacks independent verification beyond credit-card spending patterns. No source provides a definitive forecast for gasoline prices after a potential peace deal reopening the Strait of Hormuz.
Verbatim Quotes
- “The prospect of higher prices and faster inflation continues to loom over confidence readings with many households taking a more cautious approach to purchases this year,” — Ben Ayers, Nationwide senior economist
- “They keep showing up ... We're not seeing any change in performance across cohorts,” — Fran Horowitz, CEO, Abercrombie & Fitch
- “Counterintuitively or not, it seems that whereas people are tightening their wallets for milk and other 'needs', they are continuing to spend up on clothes and other 'wants',” — Simeon Siegel, senior managing director, Guggenheim Securities
- “In the months ahead, industry performance will be influenced by the persistence of higher gas prices, potential pricing pass through to other sectors, consumer sentiment and whether weak sentiment leads to a pullback in discretionary spend,” — Michael Gunther, Consumer Edge analyst
- “is that while people have been spending more money at gas stations, they’ve been spending more money on everything else, which means that they’re still very, very optimistic about the state of the economy, and they should be.” — Kevin Hassett, Director, National Economic Council
Outlook: Elections and Energy Prospects
Analysts expect the Strait of Hormuz to remain a focal point for oil-price volatility; a cease-fire could lower pump prices but “higher prices may linger for months,” according to political observers. The midterm elections in November are projected to become a referendum on affordability, with both parties positioning consumer-price trends as central campaign issues. Consumer expectations for income growth remain modest, and the durability of discretionary spending will likely hinge on the trajectory of gas and food prices in the summer months.
