Consumer Sentiment Dips to Second-Lowest Ever: How Rising Inflation Expectations and Tariffs are Impacting Your Wallet

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Consumer Sentiment Dips to Second-Lowest Ever: How Rising Inflation Expectations and Tariffs are Impacting Your Wallet

U.S. consumers are feeling more anxious about rising prices, according to a recent survey from the University of Michigan. The consumer sentiment index fell to 50.8 in May, down from 52.2 in April. This low score is a sign that many people are worried about their finances.

One major concern is tariffs. In fact, nearly 75% of survey participants mentioned tariffs when discussing their economic worries, a jump from about 60% in the previous month. Joanne Hsu, director of the Surveys of Consumers, noted that uncertainty around trade policies is heavily influencing how consumers feel about the economy.

Inflation expectations are climbing too. Consumers anticipate a year-ahead inflation rate of 7.3%, up from 6.5% in April. Long-term expectations also nudged higher, reaching 4.6% from 4.4%. These figures matter because both investors and policymakers are closely monitoring them.

Federal Reserve Chair Jerome Powell has stressed the importance of keeping long-term inflation expectations steady before resuming any cuts to interest rates. Even with a recent 90-day pause on some tariffs between the U.S. and China, the overall tariff rate for goods entering the country is still much higher than before Donald Trump’s presidency. Economists generally agree that tariffs could lead to a short-term price increase, but experts are divided on whether this will spark prolonged inflation.

Interestingly, recent inflation data shows no significant tariff impact. The consumer price index and producer price index for April were lower than expected, leaving some doubt about the connection between tariffs and inflation.

As we await the final consumer sentiment index due on May 30, many are curious if the tariff pause will improve people’s outlooks. This situation highlights the intricate relationship between trade policies, inflation expectations, and consumer sentiment.

For more on the broader economic context, you can check out the Bureau of Labor Statistics for the latest updates and data trends.



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