- US consumer sentiment dropped sharply in May, reaching the second-lowest level ever recorded.
- Tariff concerns and rising inflation expectations are weighing heavily on households.
- Experts note that American consumers are displaying clear signs of elevated financial stress.
Consumer Confidence Crash Reflects Tariff Fallout
In a sharp sign of growing economic unease, US consumer confidence crashed again in May, dragged down by persistent fears over inflation and tariff policy. The University of Michigan’s latest Consumer Sentiment Index fell to 50.8 — its second-lowest reading ever — far below economists’ expectations and a clear indication of rising pessimism across American households.
This steep drop in sentiment was primarily driven by widespread concern over tariffs, with 75% of survey respondents mentioning tariffs without prompting — a significant increase from April’s 60%. The data underscores just how much President Trump’s trade policies remain top of mind for many Americans.
Joanne Hsu, Director of the Survey of Consumers, highlighted that “uncertainty over trade policy continues to dominate consumers’ thinking about the economy.” Despite a brief 90-day pause in the US-China tariff standoff announced during the survey period, most of the data had already been collected by then — leaving little time for optimism to take hold.
Inflation Fears Add to the Consumer Confidence Crash
The consumer confidence crash wasn’t driven by trade concerns alone. Inflation expectations have soared to levels not seen since the early 1980s. The survey revealed that one-year inflation expectations surged to 7.3% in May, up from 6.5% the previous month and more than double the 3.3% expected just four months ago.
Long-term inflation forecasts also edged higher, rising to 4.6% from 4.4% in April, adding to the sense of financial instability among American households.
RSM Chief Economist Joe Brusuelas commented on the deteriorating outlook, stating, “One gets the sense that the American household is under rising stress, and this survey captures what is clearly an elevated discontent of the consumer.”
The consumer confidence crash paints a troubling picture for the economy, particularly as households scale back spending amid soaring prices and policy uncertainty. With inflation expectations surging and trade fears lingering, consumer resilience appears to be wearing thin.
Tariff Pause Offers Only Brief Relief
Though the US and China agreed to a temporary 90-day tariff pause, it arrived too late to meaningfully influence the May sentiment survey. Only two days of data were collected after the agreement, making it insufficient to alter the overall results.
Nonetheless, Hsu noted that some sentiment indicators showed slight improvement during those final days. “Many survey measures showed some signs of improvement,” she said, “but were too small to change the overall picture.”
The final sentiment reading for May, set to be released on May 26, may provide clearer insight into whether the tariff pause has had any lasting effect on consumer expectations.
Still, the consumer confidence crash underlines how fragile sentiment remains in the current climate. The trade policy volatility and inflationary pressures have created a feedback loop of anxiety for American consumers, who are already facing higher prices on everyday essentials.
Economic Outlook at Risk as Consumer Confidence Crashes
The implications of a consumer confidence crash extend well beyond sentiment metrics. Consumer spending accounts for nearly 70% of US GDP, and prolonged pessimism could translate into weaker retail sales, reduced investment, and slower economic growth.
If inflation expectations continue to rise, the Federal Reserve may face increased pressure to tighten monetary policy further — potentially leading to higher borrowing costs and further economic strain.
Unless there is a sustained improvement in trade relations and a tangible reduction in inflation, American consumers may continue to feel squeezed, leaving the broader economy vulnerable to further downturns.
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