By Christopher Lugerber
WASHINGTON (AP) — U.S. consumer sentiment fell slightly in May for five months and in the astonishing economist in May.
The preliminary reading of the University of Michigan’s closely monitored consumer sentiment index, released Friday, fell 2.7% per month to 50.8, the second-lowest level in the nearly 75-year history of the survey. The only low reading was in June 2022. Since January, sentiment has fallen by nearly 30%.
Americans have largely got a sour view of where the economy is heading, inspired by the Trump administration’s immense import obligations. In recent weeks, the White House has retreated its toughest policies, but the average obligation remains high by historical standards.
Consumer outlook is sharply divided by political views, with some economists questioning the findings of their research. And while the University of Michigan switched both online and phone responses to only online last year, some analysts feared they’ve introduced a more negative bias.
The Democratic Party’s emotional index fell to 33.9 this month. This is the lowest since partisan data began in 1980, far below the level reached during the Great Recession of 2008-2009 at the depths of the Covid pandemic.
It’s 84.2 for Republicans, but it slipped from April’s 90.2, the lowest since Trump’s election.
Trump had slapped 145% tariffs on all imports from China. This is a move that effectively halted trade with the third largest trading partner of US goods. However, on Monday, the two countries reached a deal that cuts US tariffs to 30%, while China said it would cut US export obligations from 125% to 10%.
The survey was conducted between April 22nd and May 13th. This includes just two days after China’s tariffs fell.
But on Thursday, Walmart said it began to raise prices in response to tariffs, and will do more in June and July, just as families prepare for a return season to school. The company counts 90% of the US population as its customers, and price increases at the country’s largest retailer could begin to sink into Americans already immersed in post-pandemic inflation.
The survey found that consumers are increasingly worried about rising inflation. Over the next 12 months, consumers expect inflation to jump to 7.3%. Over the next five years, they predicted that inflation would reach 4.6%, the highest since 1991, rising from 4.4% last month.
These expectations are usually higher than actual inflation, falling to 2.3%, the lowest level in four years or more last month. Still, economists and the Federal Reserve are closely monitoring inflation expectations as they could be self-fulfilling. If people are worried, if inflation accelerates, they can take steps that can boost prices, such as demanding higher wages.
Federal Reserve Chairman Jerome Powell said Michigan’s expected inflation count is “outlier.” Market-based measures of future inflation, which some Fed officials put greater weight, remain largely stable. Still, if inflation expectations from the Michigan survey steadily rise, it could be less likely that the Fed will soon cut its key interest rates.
Original issue: May 16, 2025, 12:07pm EDT
