Federal Reserve Chair Jerome Powell discussed how the central bank’s policy framework could adjust to more volatile inflation and more frequent supply shocks. (Credit: Bloomberg)
Consumer Sentiment Takes Another Hit in May
In a troubling trend, U.S. consumer sentiment fell once more in May, reflecting deepening concerns over inflation and ongoing tariff uncertainties. The latest findings from the University of Michigan Surveys of Consumers reveal a stark reality: the Consumer Sentiment Index plummeted to 50.8 in its preliminary May reading, down from a final tally of 52.2 in April. This decline underscores a significant disconnect from economists’ forecasts, which had predicted an increase to 53.4.
A Steep Decline in Consumer Confidence
The current sentiment figure represents a staggering 30% drop since January 2025 and marks the fifth consecutive month of declines. Alarmingly, the 50.8 reading is now the second-lowest in recorded history, trailing only the peak inflation period of June 2022.
Joanne Hsu, Director of Surveys of Consumers, pointedly noted, “Tariffs were spontaneously mentioned by almost three-quarters of consumers, a sharp increase from around 60% in April. This indicates that uncertainty surrounding trade policy is deeply influencing consumer perspectives on the economy.”
Recession Fears Still Linger
Adding to the sense of unease, financial expert Jamie Dimon warns that a recession remains a plausible scenario, highlighting the precarious state of consumer confidence.
Consumer sentiment declined for the fifth consecutive month in May. (HUM Images/Universal Images Group via Getty Images / Getty Images)
The Uncertainty Surrounding Tariffs
The survey coincided with President Donald Trump’s recent announcement regarding a temporary tariff reduction on China, aimed at easing trade tensions. These adjustments, effective for 90 days, entail cutting tariffs on Chinese goods from 145% to 30%, while China’s tariffs on U.S. exports drop from 125% to 20%.
However, despite a glimpse of improvement in some survey metrics following this temporary tariff relief, Hsu indicated that “these initial upticks were too insignificant to alter the overall landscape—consumers remain pessimistic about the economic outlook.”
JPMorgan’s Outlook on Recession Risks
In a related perspective, JPMorgan recently reduced its recession probability following the tariff truce with China, further showcasing the volatility in economic assessments.
Federal Reserve Chair Jerome Powell has said the central bank will monitor for signs of tariff-induced price hikes. (Olivier Douliery/AFP via Getty Images / Getty Images)
Consumer Finances Under Pressure
The impact of these economic trends is palpable, with current assessments of personal finances plummeting almost 10% amid diminishing incomes. In an alarming signal, consumer expectations for inflation over the next year surged to 7.3%, rising from 6.5% in April. This uptick was observed across the political spectrum, as both Democrats and Republicans expressed heightened anxiety.
This 7.3% inflation forecast marks the highest assessment since April 1981, a chilling reminder of past economic turmoil.
Further complicating matters, long-term inflation expectations also escalated to 4.6% in May, climbing from 4.4% a month prior, driven primarily by a notable increase among Republican respondents.
In these turbulent times, it’s imperative for consumers and businesses alike to stay informed and agile, as the landscape continues to evolve. For insights on navigating these challenges, GET FOX BUSINESS ON THE GO BY CLICKING HERE.
