Consumer Concerns Rise Over Tariffs and Inflation
Recent survey data from the University of Michigan indicates a troubling trend among U.S. consumers who are growing increasingly anxious about inflation driven by tariffs. As of May 2025, the consumer sentiment index has fallen to 50.8, a decline from 52.2 in April. This marks its second-lowest level ever recorded, second only to figures seen in June 2022.
Shifts in Inflation Expectations
Adding to the economic unease, short-term inflation expectations surged to 7.3% from 6.5% in the previous month. Long-term expectations also increased slightly, registering at 4.6%, up from 4.4%. These shifts in sentiment reflect consumers’ growing apprehension regarding price stability.
Impact of Recent Trade Policies
Notably, much of the survey was conducted prior to the recent announcement of a 90-day suspension of most tariffs between the U.S. and China. This ongoing trade situation has become a significant concern for consumers, with nearly three-quarters identifying tariffs as a major issue, an uptick from approximately 60% in April. “Uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” stated Joanne Hsu, director of the Surveys of Consumers.
Inflation and Economic Policy Considerations
Inflation expectations are closely monitored by investors and policymakers alike. Federal Reserve Chair Jerome Powell has emphasized the importance of stabilizing long-term inflation expectations before the central bank considers cutting interest rates further. Despite the recent tariff pause, the average tariff rate on goods entering the U.S. remains considerably higher than levels seen prior to President Donald Trump’s term in office.
Economic Indicators and Future Outlook
Economists largely concur that while tariffs may prompt a short-term uptick in prices, the long-term effects on inflation remain uncertain. Recent data, including April’s consumer price index and producer price index, has not suggested a substantial increase attributed to tariffs, both falling below market expectations.
Upcoming Consumer Sentiment Releases
The final consumer sentiment index for May is set to be published on May 30. Observers will be keen to determine whether the recent pause in tariffs will positively influence consumer sentiment.