Consumer sentiment in the United States fell for the fifth straight month in May, driven by growing concerns over inflation linked to President Donald Trump’s trade policies. According to preliminary data from the University of Michigan, the consumer sentiment index dropped by 2.7 per cent to 50.8- its lowest level since June 2022 and nearly 30 per cent below its January reading. The decline contradicts economists’ expectations of stabilization. The drop reflects rising anxiety over inflation, fueled by Trump’s aggressive tariff strategy. Although recent trade talks led to a reduction in US tariffs on Chinese goods, from 145 per cent to 30 per cent, current rates remain historically high. In return, China agreed to lower duties on US exports from 125 per cent to 10 per cent.People became more concerned about the escalating cost of living as inflation expectations surge. The Michigan survey found that consumers anticipate inflation to hit 7.3 per cent over the next year, the highest since 1981, up from 6.5 per cent last month. The five-year inflation outlook rose to 4.6 per cent- its highest since 1991.The Michigan survey, conducted from April 22 to May 13, only partially reflected the impact of the US-China tariff reductions announced on May 11.Meanwhile actual inflation fell to 2.3 per cent last month, a four-year low, thus, the Federal Reserve officials remain cautious. Persistent inflation expectations may delay any interest rate cuts, as they risk becoming self-fulfilling through wage demands and price hikes. Fed Chair Jerome Powell had previously called these consumer projections an “outlier,” but their steady climb may influence monetary policy decisions.
