Catenaa, Friday, May 16, 2025- US Consumer sentiment fell to its second-lowest level in May as Americans expect Trump’s tariffs to raise prices over the next year.
The latest University of Michigan survey released Friday showed that the sentiment index slid to 50.8, below the 52.2 seen last month. The reading was just shy of the all-time low of 50 seen in June 2022.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Surveys of Consumers Director Joanne Hsu said in the release.
Pessimism over the inflation outlook soared again, as one-year inflation expectations jumped to 7.3%, the highest since 1981, from 6.5% the month prior. Just four months ago, consumers had expected inflation of 3.3% over the next year.
Long-run inflation expectations, which track expectations over the next five to 10 years, climbed, too, hitting 4.6% in May, up from 4.4% in April.
The preliminary sentiment reading surveyed consumers from April 22 to May 13, meaning just two days of responses came after the US and China agreed to a 90-day tariff pause.
Hsu noted that “many survey measures” showed some signs of improvement in the two days following the latest tariff pause but were too small to change the overall picture.
“The final release for May will reveal the extent to which the May 12 pause on some China tariffs leads consumers to update their expectations,” Hsu said.
The news of the US-China deal to reduce tariffs contributed to a massive stock market rally earlier in the week, with both the S&P 500 and Nasdaq Composite officially erasing all of the losses seen following the initial April 2 tariff announcements
The S&P 500 has gained by almost 13% since April 16, and the Nasdaq Composite by 17.2%.
