Key Facts
The University of Michigan released its preliminary Consumer Sentiment Index for May, which fell to 50.8 from April’s final reading of 52.2. This marks the lowest level since June 2022 and falls short of market expectations of 53.4. The data highlights growing concerns among consumers about economic conditions, with inflation and trade policies playing significant roles.
The report also revealed a sharp increase in the one-year inflation expectation, which rose to 7.3% from 6.5% in April. This is the highest level since November 1981. Similarly, long-term inflation expectations climbed to 4.6%, up from 4.4% the previous month, reaching levels not seen since March 1991. Both Republican and Democratic respondents anticipated short-term inflation to rise further.
Christopher Rupkey, Chief Economist at FWDBONDS, noted that consumer anxiety extends beyond rising prices. He highlighted concerns about potential shortages of goods in the coming months, driven by the impact of tariff policies. These fears reflect broader uncertainty about the availability of essential products.
The survey also pointed to a significant decline in confidence among Republican respondents, with their sentiment dropping by 7%. This marks the first major decrease in confidence among this group since former President Donald Trump’s election victory in November 2024. The findings suggest growing unease within Trump’s support base regarding the administration’s aggressive trade policies.
Joanne Hsu, Director of Consumer Surveys, emphasized that trade policy uncertainty remains a key concern for consumers. She noted that approximately 75% of respondents mentioned tariffs in their comments, a notable increase from 60% in the previous month. While confidence among independents showed a slight improvement, the overall sentiment remains subdued.
The data underscores the challenges posed by inflation and trade policy uncertainty, which continue to weigh heavily on consumer confidence across political affiliations.
The University of Michigan’s preliminary Consumer Sentiment Index for May dropped to 50.8, down from April’s final reading of 52.2, marking the lowest level since June 2022 and falling short of market expectations of 53.4. The report highlights growing consumer concerns about economic conditions, particularly inflation and trade policies.
One-year inflation expectations surged to 7.3% from 6.5% in April, the highest level since November 1981. Long-term inflation expectations also rose to 4.6% from 4.4%, reaching levels not seen since March 1991. Both Republican and Democratic respondents anticipated further short-term inflation increases.
Christopher Rupkey, Chief Economist at FWDBONDS, noted that consumer anxiety extends beyond rising prices, with fears of potential goods shortages due to tariff policies. Joanne Hsu, Director of Consumer Surveys, emphasized that trade policy uncertainty remains a significant concern, with 75% of respondents mentioning tariffs, up from 60% the previous month.
Republican respondents experienced a 7% drop in confidence, the first major decline since former President Donald Trump’s 2024 election victory. This reflects growing unease within Trump’s support base regarding aggressive trade policies. While confidence among independents showed slight improvement, overall sentiment remains subdued.
