Tariff Deals Aren’t Easing Consumer Concerns Yet

Consumer sentiment fell for the fifth straight month, and President Donald Trump’s decision to reverse some tariffs has not improved the public mood.

The Michigan Consumer Sentiment Survey declined again in May to 50.8, the second-lowest sentiment reading in the survey’s history. The report’s closely followed inflation projections showed consumers expected prices to rise by 7.3% over the next year. It’s the highest inflation expectation since 1981.

Economists expected a slight rebound in sentiment this month amid optimism about trade negotiations and the first agreements being reached. Consumer sentiment has plunged so far this year on worries that import taxes would raise prices.

Survey Doesn’t Fully Capture U.S.-China Trade Deal

While the preliminary readings for May capture the period after Trump issued a 90-day pause on many tariffs on April 9, the survey only covers two days after the White House announced a tariffs agreement with China on May 12. 

“Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture—consumers continue to express somber views about the economy,” wrote Michigan Survey of Consumers Director Joanne Hsu.

Sentiment surveys have shown that consumers are worrying about the direction of the economy in the face of higher U.S. tariffs. But so far, the “soft data” fears expressed by consumers haven’t shown up in the “hard data” of retail sales and other economic measurements.

“If you took them at face value Americans would be crashing the economy by spending next to nothing, but retail sales rose last month, though slightly,” wrote Navy Federal Credit Union Corporate Economist Robert Frick.  “What this does tell us is consumers are so on edge that a contraction in the labor market or in incomes could easily shock consumer spending and push us into recession.”