Consumer sentiment at University of Michigan stays steady in May
U.S. Consumer Sentiment Remains Stable in May Amid Trade Uncertainties
Washington – Final results from the University of Michigan's consumer sentiment survey revealed that the index held steady at April's level of 52.2 points in May, bucking preliminary estimates indicating a drop to 50.8 points. The stability was attributed to a temporary truce in trade disputes, including the suspension of tariffs on certain Chinese goods.
Looking forward, consumers anticipate inflation for goods and services to reach 6.6 percent, a slight rise from April's projection of 6.5 percent. Long-term inflation expectations eased, however, falling to 4.2 percent from 4.4 percent in the previous month.
The Federal Reserve aims for an inflation rate of 2 percent, and it closely monitors the development of a fixed basket of goods related to personal consumption, known as the PCE index. The PCE index increased by 2.1 percent year-on-year in April, narrowly missing the central bank's target of 2.0 percent.
Issues surrounding the legality of former President Donald Trump's trade policies, which increased trade barriers to protect domestic industries, are currently under review by the U.S. justice system. Many experts believe these policies could lead to higher prices, a concern shared by the Federal Reserve, as indicated in the minutes of its latest meeting. The Fed is holding off on interest rate cuts until it gains more clarity on the economic implications of trade policies.
Trade disputes have had varying effects on inflation and consumer sentiment throughout 2025. Tariffs have resulted in higher prices for consumers due to increased costs of imported goods, potentially leading to reduced disposable income, strained household budgets, and negatively affecting consumer sentiment. The uncertainty surrounding trade negotiations has also contributed to caution among both businesses and consumers, with the potential for economic slowdowns and increased unemployment.
(Reporting by Washington bureau, written by Reinhard Becker, editing by Kerstin Dörr. For any questions, please contact our newsroom at [email protected])
Despite the ongoing trade uncertainties, consumers expect a slight rise in inflation for goods and services to reach 6.6 percent, as stated in the University of Michigan's consumer sentiment survey. Amid this, the business sector remains cautious due to potential economic slowdowns and increased unemployment resulting from trade disputes.
