A recent survey shows that due to increasing concerns over tariffs, the consumer confidence index in the United States dropped to its second lowest level in history in May, while inflation expectations soared to the highest level in decades.
According to the University of Michigan Survey of Consumers released on Friday, the preliminary figure for the Consumer Sentiment Index in May fell from 52.2 a month ago to 50.8. This marks the second lowest level on record, just above the historic low of 50 set in June 2022 when the inflation rate was at its highest point in 41 years.
Joanne Hsu, head of the University of Michigan Consumer Survey, stated in a press release, “Nearly three-quarters of consumers mentioned tariffs spontaneously, up from nearly 60% in April; the uncertainty surrounding trade policies continues to dominate consumers’ views on the economy.”
Trade tensions appear to be a key factor influencing consumer confidence, although this survey was largely conducted before the U.S. and China announced a 90-day suspension of most tariffs against each other.
The survey also indicates that consumers’ inflation expectations for the next year rose from 6.5% in April to 7.3% in May, while long-term inflation expectations increased from 4.4% last month to 4.6% currently.
Concerns about tariffs have crossed party lines, as Hsu noted that while non-partisan consumers saw a slight increase in confidence this month, it was offset by a 7% decline among Republicans.
The ongoing fears of a recession in the U.S. economy, triggered by President Trump’s aggressive tariff policies and the ensuing trade war, have contributed to the continuous decline in consumer confidence every month this year. According to the latest report on Friday, the University of Michigan Consumer Confidence Index has dropped by nearly 30% since January.
Financial data and software company FactSet had previously forecasted a potential improvement in consumer confidence for May, with an estimated reading of 55.
Trump’s trade war saw some positive developments earlier this month, particularly with an unexpected easing measure announced on May 12 – a mutual reduction of some tariffs between the U.S. and China. However, the University of Michigan Consumer Survey released on Friday was conducted between April 22 and May 13.
The final figure for the University of Michigan Consumer Confidence Index for May is set to be announced on May 30, and this data will be closely watched to observe whether the tariff suspension will lead to an improvement in consumer confidence.