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Consumer Moods Hold Steady as Inflation Improves
President Donald Trump’s tariff policies are now the dominant force in the economy and consumer perceptions.
By: Tim Smart
Source: U.S. News
Spencer Platt|Getty Images
People shop at a grocery store in Brooklyn on May 13 in New York City.
American consumers grew somewhat more positive in May, but those sentiments – like many other current readings on the economy – appear tied to the roller-coaster nature of President Donald Trump’s tariff policies.
The University of Michigan’s final consumer sentiment index for May was basically unchanged after four months of sharp declines, but views of the future state of the economy remain weak.
“Sentiment had ebbed at the preliminary reading for May but turned a corner in the latter half of the month following the temporary pause on some tariffs on China goods,” said survey director Joanne Hsu. “Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement. However, these positive changes were offset by declines in current personal finances stemming from stagnating incomes throughout May. Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future.”
“Year-ahead inflation expectations were little changed at 6.6%, inching up from 6.5% last month,” Hsu said. “This is the smallest increase since the election and marks the end of a four-month streak of extremely large jumps in short-run expectations. Notably, long-run inflation expectations fell back from 4.4% in April to 4.2% in May.”
Trump’s tariff policies are now the dominant force in the economy and consumer perceptions. But the economy continues to progress, although the most recent reading of growth in gross domestic product for the first quarter estimates a 0.2% contraction for the period.
The sentiment report came less than two hours after a gauge of inflation closely followed by the Federal Reserve showed prices increased at a 2.1% annual rate in April, better than expected. Economists had predicted a 2.2% increase.
The personal consumption price expenditures index increased by 0.1% for the month.
Slowing inflation will help the Fed in deciding whether to lower interest rates, something that President Donald Trump reportedly asked for in a meeting with Chairman Jerome Powell on Thursday. Prices for necessities like rent and groceries remain high, and some economists have said Trump’s sweeping import tariffs will add to inflation.
But Powell has maintained the Fed will be guided by what the economic data shows, and analysts do not expect any move by the central bank before more clarity comes on the tariffs. Courts have ruled in recent days both ways on Trump’s tariffs, in one case finding that he overstepped his authority in imposing them and then having that decision temporarily set aside by an appeals panel, setting up a possible Supreme Court ruling on the issue.
“It's far too early to take a victory lap as one data point does not make a trend and the uncertainty of tariff policy and price reaction remain an important driver,” said Karen Manna, vice president and investment director at Federated Hermes in Pittsburgh. “PCE will be quickly brushed aside as the market prepares for next week’s jobs data which has the likelihood to be a real market mover. Overall, this does little to change the market’s expectation for two cuts this year.”
Source: https://www.usnews.com/news/economy/articles/2025-05-30/consumer-moods-hold-steady-as-inflation-improves