Consumer sentiment steadied in May as Americans grew more optimistic about the US economy following developments in President Trump’s trade policy.
According to the final May reading of the University of Michigan consumer sentiment survey released Friday, headline sentiment remained unchanged from the previous month, halting a four-month streak of sharp declines.
While sentiment dipped in the preliminary May reading, it rebounded later in the month, buoyed by a temporary pause on certain tariffs on Chinese goods that helped improve the economic outlook.
“Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement,” Joanne Hsu, director of consumer surveys at the University of Michigan, said in the release.
Long-run inflation expectations, which reflect the outlook over the next five to ten years, eased to 4.2% in May from 4.4% in April, marking the first decline since December 2024 and ending an unprecedented four-month streak of increases.
Meanwhile, year-ahead inflation expectations held relatively steady at 6.6%, up slightly from 6.5% in April. This modest uptick is the smallest since the election and signals a break in the four-month trend of sharp increases in short-run inflation expectations.
Still, the improvement in inflation expectations wasn’t enough to outweigh other areas of weakness, leaving consumers' overall mood subdued.
“These positive changes were offset by declines in current personal finances stemming from stagnating incomes throughout May,” Hsu said. “Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future.”
