Consumer pessimism is about as low as it gets right now, as tariff anxieties and inflation fears weigh on the minds of households across the political spectrum.
The University of Michigan’s consumer sentiment index, which measures attitudes on various economic issues, fell 2.4% to 50.8 in May from 52.2 in April, according to preliminary data released Friday. That is the second-lowest index reading on record, trailing only June 2022.
Economists polled by The Wall Street Journal had predicted that the index would increase in May to 53.5, but consumer sentiment is now down almost 30% since January.
While the sentiment index among Democrats had already reached its lowest level on record in April, at 34.4, sentiment had risen last month among Republicans to 90.2. But the preliminary May survey showed a 7% decline in Republican sentiment.
Tariffs were front and center in most consumers’ minds, according to Joanne Hsu, director of Surveys of Consumers at the University of Michigan.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April,” Hsu wrote. “Uncertainty over trade policy continues to dominate consumers’ thinking about the economy.”
Hsu added that interviews for the May report were conducted between April 22 and May 13, with the survey window closing two days after news first broke of a 90-day pause in the U.S.-China trade war, with the two countries agreeing to reduce tariffs on imports to respective rates of 30% for the U.S. and 10% for China.
“Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture — consumers continue to express somber views about the economy,” Hsu stated.
Year-ahead inflation expectations among consumers — which in April reached the highest mark since 1981 — rose another 80 basis points to 7.3% in May.
Hsu noted that both Democrats and Republicans expect the inflation rate to increase in the short term and over the next five years, as “long-run inflation expectations lifted from 4.4% in April to 4.6% in May, reflecting a particularly large monthly jump among Republicans.”
