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U.S. Consumer Sentiment Drops to Near Record Low as Inflation Fears Persist

The University of Michigan index fell to 50.8 in May, with tariffs and rising inflation expectations driving a nearly 30% decline since January.

Shoppers consider big-screen televisions on display in a Costco store on April 1, 2025, in Thornton, Colorado.
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Overview

  • The University of Michigan's consumer sentiment index recorded a preliminary May reading of 50.8, the second-lowest in its history, just above the June 2022 record low of 50.
  • Consumer confidence has declined for five consecutive months, falling nearly 30% since January, as Americans express growing unease about economic conditions.
  • Tariffs remain a dominant concern, with three-quarters of survey respondents mentioning them, up from 60% in April, despite a U.S.-China agreement on May 12 to reduce duties.
  • Year-ahead inflation expectations surged to 7.3%, the highest since 1981, reflecting fears of escalating costs despite recent easing in actual inflation data.
  • Federal Reserve Chair Jerome Powell indicated that rising inflation expectations, influenced by trade policies, could delay potential interest rate cuts, keeping monetary policy tight.