Consumer confidence falls to lowest level in 3 years amid inflation fears, U. of Michigan index shows

Consumer sentiment in the United States took a slight dip in May for the fifth consecutive month, with concerns growing among Americans about the potential impact of President Trump’s trade war on inflation. The University of Michigan’s preliminary reading of the consumer sentiment index, released on Friday, showed a 2.7% decline on a monthly basis to 50.8, marking the lowest reading since July 2022. The consistent decrease in sentiment over the past few months, totaling nearly 30% since January, indicates a growing unease among consumers regarding the economy and their financial future.

Economists are keeping a close eye on these survey results, with Carl B. Weinberg, chief economist at High Frequency Economics, noting that consumer spending may be curbed by a sense of caution under the current economic agenda. This decline in confidence could lead to Americans holding off on major purchases until they have a clearer understanding of the economic landscape. Weinberg emphasized that uncertainty often prompts households to prioritize saving over spending.

While the latest survey results paint a somewhat grim picture, Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, believes that the initial survey may not have captured any positive shifts in sentiment following the recent agreement between the U.S. and China to ease tariffs. Allen pointed out that despite the decline in confidence, retail sales saw a modest increase in April, and indicators of discretionary spending on services remain stable.

In April, President Trump imposed hefty tariffs of 145% on all imports from China, effectively disrupting trade with the U.S.’ third-largest trading partner in goods. However, a recent agreement between the two countries has led to a reduction in tariffs, with the U.S. lowering its tariffs to 30% and China cutting its duties on U.S. exports to 10%. Additionally, the U.S. reached a trade deal with the United Kingdom this month, although experts suggest that high tariffs are likely to persist in the near future.

President Trump announced on Friday that the administration would be notifying other nations of the tariff rates the U.S. plans to impose on imports. Despite ongoing trade tensions and economic uncertainties, the President remains optimistic about the potential for trade deals with numerous countries.

Overall, the American public’s perception of the economy has soured in response to the administration’s trade policies, which have the potential to hinder growth and drive up prices. While the White House has scaled back on some of its more aggressive measures, tariff rates remain high compared to historical norms. A recent poll by CBS News showed a decline in approval ratings for President Trump’s handling of the economy, indicating a growing sense of dissatisfaction among Americans.