US consumer sentiment drops to six-month low in May

WASHINGTON (Reuters) – U.S. consumer sentiment slumped to a six-month low in May as a standoff to raise the federal government’s borrowing cap fanned worries about the economy’s outlook, a survey showed on Friday.

The University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 57.7 this month, the lowest reading since last November and down from 63.5 in April. Economists polled by Reuters had forecast a preliminary reading of 63.0.

“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,” said Surveys of Consumers Director Joanne Hsu in a statement.

“If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default.”

The survey’s reading of one-year inflation expectations dipped to 4.5% this month after jumping to 4.6% in April. Its five-year inflation outlook rose to 3.2%, the highest reading since 2011, from 3.0% last month.

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