The barometer for current economic conditions was lower at 111.7 from a preliminary of 112.7 and a final of 112.7 in April. The gauge of future expectations also went down to 87.7 from a preliminary of 88.1 but was still higher than 87 in April.
Americans expect the inflation rate to be 2.6 percent next year (2.5 percent in April), matching earlier estimates while the 5-year expectation rose to 2.4 percent from a preliminary 2.3 percent (2.4 percent in April).
The May figure was nearly identical with the December to May average of 97.3. Moreover, the partisan divide between Democrats and Republicans has also remained largely unchanged, with the first expecting a recession and the other more robust economic growth. How long will economic expectations be dominated by partisanship? Unlike differences in expectations across age, education, or income groups, which usually reflect actual differences in prospects for employment and income expectations, for example, partisanship is reflected by economic policy preferences. Since no major policies, such as healthcare, taxes, or infrastructure spending have yet been adopted, the partisan divide may reflect differences in policy preferences expressed as expected economic outcomes. Thus, the extreme partisan divide may persist until passage is deemed either inevitable or impossible. While extremes may well narrow, it is unlikely that the impact of partisanship on economic expectations will disappear. Despite the expected bounce back in spending in the current quarter, personal consumption is expected to advance by 2.3% in 2017, although this is based on averages across the political divide, which has never been as extreme as it is currently.