Consumer Sentiment Declines Amid Inflation Concerns
U.S. consumer sentiment continued its downward trend in May, as Americans’ outlook on future inflation worsened and concerns lingered over the impact of President Donald Trump’s tariffs.
The University of Michigan Consumer Survey recorded a drop to 50.8 in May, down from a final reading of 52.2 in April. Economists had anticipated a rise to 53.4, according to predictions from Reuters.
This decline means consumer sentiment has plummeted by about 30% since January 2025, marking a five-month consecutive downturn. A reading of 50.8 is noteworthy—it’s the second lowest since June 2022, which saw a peak in the latest inflation cycle.
Interestingly, about three-quarters of the consumers surveyed mentioned taxes. This is a significant jump from nearly 40% previously. It seems that uncertainties surrounding trade policies continue to influence consumer perceptions of the economy, as stated by consumer director Joanne HSU.
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The survey occurred just two days after Trump announced a temporary agreement with China to reduce tariffs—cutting them from 145% to 30% on Chinese products, while tariffs on U.S. exports decreased from 125% to 20%.
This temporary relief aims to provide breathing room for negotiating long-term agreements. However, HSU remarked that while some research measures showed slight improvements after the decrease in tariffs, these were not significant enough to alter the overall perspective. Consumers still hold a rather pessimistic view of the economy.
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The report indicated that personal financial assessments have slipped nearly 10%, driven by declining incomes.
Inflation expectations among consumers have surged to 7.3% for the year, up from 6.5% in April—this was observed among both Democrats and Republicans surveyed. Notably, this inflation outlook is the highest recorded since April 1981.
Increased Long-term Inflation Expectations
Additionally, there was a notable increase among Republican respondents, with long-term inflation projections rising to 4.6% in May.
