Consumer confidence falls to lowest level in 3 years amid inflation fears
Consumer sentiment in the U.S. edged down in May for a fifth straight month as Americans increasingly worry that President Trump's trade war will worsen inflation.
The preliminary reading of the University of Michigan's closely watched consumer sentiment index, released Friday, declined 2.7% on a monthly basis to 50.8, the lowest reading since July 2022. Since January, sentiment has tumbled nearly 30%, a sign Americans are worried about the economy and their financial prospects, according to economists.
"These survey results suggest that consumer spending may be increasingly restrained by caution under the Trump economic agenda," Carl B. Weinberg, chief economist at investor advisory firm High Frequency Economics, said in a research note.
Weinberg added that the decline in confidence may cause Americans to hold back on purchasing big-ticket items until they have a clearer picture of what's happening in the economy. "Uncertainty usually foments a feeling in households that more saving is a good idea," he added.
Less grim than it looks?Oliver Allen, senior U.S. economist with Pantheon Macroeconomics, noted that the U. of Michigan's initial survey likely failed to capture any improvement in sentiment from the U.S. and China agreeing to ease tariffs earlier this week.
"[W]e increasingly suspect that the consumer surveys, and the Michigan survey in particular, are painting an unduly negative picture of the consumer outlook at present," Allen said in a report. "Headline retail sales eked out a further small gain in April, following a 1.7% jump in March, despite the recent plunge in confidence. Moreover, most near-real indicators of consumers' discretionary spending on services are holding up well."
Trump in April slapped 145% tariffs on all imports from China, a move that effectively froze trade with the U.S.' third-largest trading partner in goods. But on Monday, the two countries said they agreed to lower U.S. tariffs to 30%, while China would cut its duties on U.S. exports to 10% from 125%.
Separately, the U.S. earlier this month reached a trade deal with the United Kingdom, although trade experts said the agreement suggests high tariffs are set to remain in place for the foreseeable future.
Mr. Trump on Friday said his administration will send letters that inform other nations of the tariff rates the U.S. will impose on imports.
"[W]e have, at the same time, 150 countries that want to make a deal, but you're not able to see that many countries," Mr. Trump said during a Friday business roundtable between the U.S. and United Arab Emirates.
Americans have largely taken a sour view about where the economy is headed in the wake of the Trump administration's imposition of huge import duties, which threaten to slow growth and push up prices. In recent weeks, the White House has pulled back on its most draconian policies, though average duties are still high by historical standards.
In an April CBS News poll, 44% of Americans approved of Mr. Trump's handling of the economy, down from 51% on March 2.
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