(Washington) Consumer confidence plunged in May in the United States, weighed down by growing concerns about the health of the economy, but also by the debate on the debt ceiling and a potential default by the country.
The index fell 9% from April, falling to 57.7 points, according to the University of Michigan’s preliminary estimate released on Friday.
Analysts expected a weaker decline and saw the index settle at 62.9 points, according to the consensus of Briefing.com.
American consumers are indeed facing a “proliferation of negative news on the economy”, underlines Joanna Hsu, director of the survey, in the press release.
She mentions in particular fears of recession, but also, in the shorter term, the risks posed by “the impasse on the debt crisis”, which could lead the first economy in the world to default.
“If policymakers fail to resolve the debt ceiling crisis, these concerns for the economy will exacerbate the disastrous economic consequences of the default,” warns the economist.
Democrats and Republicans are engaged in a tussle over raising the US debt ceiling, a necessary legislative maneuver so that the world’s largest economy can continue to borrow and pay its bills, officials and creditors.
A meeting is scheduled at the White House earlier this week. Former President Donald Trump has urged Republicans to wave the threat of a default to get Democrats to make “massive cuts” in spending.
Without an agreement, the world’s largest economy would find itself, potentially as early as the 1er June according to the Treasury Department, in default of payment, an unprecedented situation which could weigh heavily on the world economy.
In detail, the University of Michigan index measuring current conditions fell 5.4% to 64.5 points. But the one measuring expectations plummets by 11.7%, to 53.4 points.
And expectations for long-term inflation are at their highest level since 2011.
Inflation fell slightly in April in the United States, to 4.9% over one year against 5.0% in March, according to the CPI index published on Wednesday. Over one month, however, it rebounded to 0.4% against 0.1% in March.