Starbucks and McDonald’s raise prices blame inflation as consumers pull back

Evidence is mounting that the American consumer’s back is starting to break. Accounting for almost 70 percent of the U.S.’s GDP, consumer spending grew 5.9 percent through 2023 despite high inflation and recession concerns, giving the economy a much-needed boost while the Federal Reserve hiked interest rates to combat inflation. Now, as the Fed maintains a higher-for-longer stance on interest rates to combat sticky inflation, consumers may need to bail out the economy one more time. Unfortunately, they may not be so willing this time around. The University of Michigan’s consumer sentiment index, a measurement of consumer spending confidence widely used by economists and policy makers, fell to its lowest in six months in May, sliding steeply to 67.4 from April’s 77.2. The figure fell below economist expectations surveyed by Bloomberg. Following a weak April jobs report and an uptick in inflation, consumers across all income, age and education groups revealed a declining interest in spending a few extra bucks.