U.S. consumer sentiment is hovering just above rock bottom, falling to its second-lowest level on record. Even in an economy that’s technically growing, households are increasingly uneasy. The culprit? Growing anxiety over tariffs, inflation, and trade policy.
The University of Michigan’s closely watched index dropped to 50.8 in its preliminary May reading, down from 52.2 in April and barely above the all-time low of 50 in June 2022, when inflation had spiked to a 41-year high. Economists polled by The Wall Street Journal (NWSA) had expected May’s early numbers to rebound to around 55. Instead, sentiment continues a five-month slide, down nearly 30% since January.
It’s not just high prices weighing on Americans — it’s the fear that prices will go even higher and that uncertainty over global trade is here to stay.
Nearly three-quarters of survey respondents spontaneously mentioned tariffs, up from 60% in April, according to the University of Michigan’s report. President Donald Trump’s aggressive tariff strategy has become the dominant factor shaping how consumers view the economy.
“It’s very clear that consumers are bracing for the uncertainty and instability of tariff policy,” Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, said Friday during an interview on Bloomberg TV.
In April, the administration imposed a massive 145% tariff on all imports from China, effectively freezing trade with the third-largest partner for the U.S. The White House partially walked that back on May 12, announcing a 90-day pause that lowers tariffs to 30%, with China reciprocating. But that announcement came near the end of the survey period and wasn’t enough to change the broader narrative.
And the pessimism isn’t limited to trade-related headlines.
As a whole, consumers are signaling that they no longer trust the economic outlook. Inflation expectations jumped sharply, with Americans now bracing for prices to rise 7.3% over the next year — the highest expected rate since 1981. Longer-term inflation expectations also ticked up, indicating concerns that today’s uncertainty may have staying power.
What makes the moment especially notable is the disconnect between sentiment and hard data. While inflation expectations are rising, actual inflation data has been more reassuring: April’s consumer price index, excluding food and energy, came in lower than forecast for the third straight month. Job growth continues. Retail spending has held up. But the numbers show that consumer psychology is turning sour — and fast.
People are increasingly pessimistic about their own finances, with perceptions of current financial health falling to the lowest level since the aftermath of the financial crisis. The broader expectations index, which captures how consumers see the future, fell to 46.5, a near 45-year low, and the current conditions index slipped to 57.6.
May’s final sentiment reading is due at the end of the month and will offer a clearer picture of whether the recent tariff de-escalation is beginning to shift consumer views.
In the meantime, the Federal Reserve is watching closely. Chair Jerome Powell has said that rising inflation expectations, especially if driven by tariffs, could delay any plans to cut interest rates. That claim has been echoed by other senior officials in the central bank.
For now, consumer mood remains bleak — and fragile. With tariffs still elevated and trade policy swinging between confrontation and compromise, Americans are left wondering whether the economy is slowing, stalling, or simply stuck in a fog of uncertainty. And while the economy hasn’t hit the brakes, consumer confidence is already in reverse.
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