Consumer sentiment plunges to record low amid surging inflation

San Francisco(CNN Business) Consumer sentiment slumped to a record low between May and June, according to preliminary survey data released by the University of Michigan on Friday.

Rising inflation continues to frustrate consumers, who are growing tired of shelling out more money -- and they are becoming increasingly despondent in the process.

Record gas prices helped push down the consumer sentiment index from 58.4 in May to 50.2 in June -- the lowest recorded level since the university started collecting consumer sentiment data in November 1952.

The preliminary reading is comparable to the trough reached during the 1980 recession, wrote Joanne Hsu, director of the university's Surveys of Consumers. In May 1980, the sentiment reading hit 51.7, according to historical data.

The final reading for June will be published on June 24.

All components of the index fell, Hsu said, noting a 24% drop in the year-ahead outlook in business conditions and a 20% decline in consumers' assessments about their personal finances.

About 46% of consumers surveyed laid the blame on inflation, an increase from 38% in May, Hsu said.

"This share has only been exceeded once since 1981, during the Great Recession," she said. "Overall, gas prices weighed heavily on consumers, which was no surprise given the 65-cent increase in national gas prices from last month."

Half of consumers mentioned gas prices during the interviews, she said.

Consumer sentiment levels have slumped in recent months amid persistent and nagging inflation as well as broader economic volatility caused by a lingering pandemic and Russia's invasion of Ukraine.

Despite this, Americans have continued to spend, the labor market has remained strong and unemployment is close to a half-century low.

"Consumer spending has long defied the fluctuations in consumer sentiment," said Greg McBride, Bankrate's chief financial analyst. "What we're likely to see this time isn't that consumers cut back on spending, it's just that they spend differently. This is an environment where necessities are chewing up more and more of a household's spendable dollars."

How consumers react from here could help or hurt the Federal Reserve's efforts to rein in inflation, Kurt Rankin, PNC senior economist, wrote in a note.

"Consumers will either choose to continue spending despite higher prices, making the Fed's choices more difficult through the second half of this year, or to pull back spending in response to higher prices -- especially regarding everyday necessities," he said. "A spending pullback would slow the economy more on the immediate horizon but could be the difference in shallowing the depth of any potential recession in 2023 by making the Fed's job a bit easier."

The Fed is expected to raise its benchmark interest rate by at least another 50 basis points at its policy-making meeting next week.