KANSAS CITY — The University of Michigan’s Index of Consumer Expectations plummeted 12% in May to 53.4 from 60.5 in April. Consumer wariness about the US economy is setting the stage for greater food-at-home spending as consumers continue to pull back on other areas of discretionary spending.

The Index of Consumer Expectations is a component of the university’s Surveys of Consumers, which includes two additional components — the Index of Consumer Sentiment and the Current Economic Conditions index. Survey results for May showed the Index of Consumer Sentiment falling 9% and the Current Economic Conditions index falling 5.4% when compared to April.

“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,” the University of Michigan said. “Year-ahead expectations for the economy plummeted 23% from last month. Long-run expectations slid by 16% as well, indicating that consumers are worried that any economic downturn will not be brief.”

The University of Michigan Surveys align with Morgan Stanley’s Alphawise Consumer Pulse survey that found consumers are looking to pull back on discretionary spending, including food-away-from home. The most recent consumer survey was conducted between April 28 and May 1.

Groceries were the only category where low- and middle-income consumers said they are planning to spend more over the next six months, according to the Morgan Stanley survey.

“Since we began our survey three years ago, spending intentions for groceries have remained consistently high — first due to the shift to food-at-home consumption during the pandemic and later by elevated food inflation — coinciding with packaged food companies reporting robust sales during this period and continuing into the first quarter of 2023,” Morgan Stanley said. “The latest survey data continues to point to a favorable outlook for grocery spending as a net 29% of respondents plan to spend more on groceries over the next month vs. last month and a net 17% plan to spend more on groceries over the next six months vs. currently.”

The Consumer Pulse survey showed 59% of respondents plan to reduce spending overall and, among those, 76% plan to reduce spending at restaurants during the next six months. While Morgan Stanley analysts note this may mean consumers trade down in where they eat out, the intentions to reduce spending on dining out and spending more on groceries may drive food-at-home volumes.

These trends suggest impending relief for consumer packaged goods (CPG) companies that have seen volumes decrease and whose financials have been buoyed by price increases implemented during the past two years. Also a positive sign, Morgan Stanley indicated demand elasticity for packaged food has remained modest.

The food-at-home market underwent a renaissance during the COVID-19 pandemic as CPG manufacturers refined their portfolios to resonate more effectively with consumers. The insights generated during that period may now be put to good use to drive additional demand as economic uncertainty prompts some consumers to rethink the allocation of their food dollars.