According to a recent University of Michigan survey released on Friday, U.S. consumers are increasingly anxious that tariffs will contribute to rising inflation. The survey revealed that the index of consumer sentiment fell to 50.8 in the preliminary reading for May, marking a decline from 52.2 in April. This figure represents the second-lowest reading on record, following June 2022's dismal statistics.
The outlook for price changes has also deteriorated, with year-ahead inflation expectations climbing to 7.3%, up from 6.5% the previous month. Long-term inflation expectations have similarly increased, rising from 4.4% to 4.6%. These shifts indicate a growing concern among consumers regarding the impact of tariffs on inflation rates.
Notably, the majority of the survey responses were collected prior to the announcement of a 90-day pause on most tariffs between the United States and China. This trade situation is emerging as a significant factor that is weighing heavily on consumer sentiment. According to Surveys of Consumers director Joanne Hsu, nearly three-quarters of consumers spontaneously mentioned tariffs during the survey, a substantial increase from nearly 60% in April. This growing concern underscores the uncertainty surrounding trade policy, which continues to dominate consumers' perceptions of the economy.
The final consumer sentiment index for May is expected to be released on May 30. This upcoming report will be closely monitored to determine whether the recent tariff pause has positively influenced consumer sentiment. As consumers continue to grapple with the implications of trade policies and inflation, the findings of this index will provide crucial insights into the current state of the U.S. economy.
