News Summary

US consumer sentiment has dropped for the fifth month in May 2025, hitting its lowest point since July 2022. The University of Michigan’s index fell by 2.7% to 50.8, showing nearly a 30% decline since January. Economists attribute this to ongoing trade war tensions and rising inflation concerns. Although retail sales showed modest growth, many consumers are delaying major purchases, indicating a cautious economic outlook. Recent trade agreements have reduced tariffs but ongoing high rates keep consumer confidence low, posing challenges for future economic recovery.

Ann Arbor, Michigan – US consumer sentiment fell for the fifth consecutive month in May 2025, reaching its lowest level since July 2022. The preliminary reading of the University of Michigan’s consumer sentiment index declined by 2.7%, landing at 50.8. This marks a nearly 30% drop in consumer sentiment since January of this year.

Economists suggest that ongoing trade war tensions under President Trump are contributing significantly to the decline. As concerns about inflation rise, apprehension about economic conditions is leading to a cautious approach among consumers. Experts warn that this erosion of confidence could result in consumers delaying major purchases, further impacting the economy.

Despite the drop in consumer sentiment, recent retail sales data shows modest growth. Retail sales rose by 1.7% in March and continued to show gains in April. However, most indicators of discretionary spending by consumers remain stable. While some analysts posit that the initial survey may not fully reflect potential improvements in sentiment following recent trade agreements, overall consumer confidence remains a critical concern.

Trade Tensions and Economic Implications

April saw President Trump impose substantial tariffs amounting to 145% on all imports from China, effectively freezing trade relations between the two countries. Recently, both nations reached a trade agreement that significantly reduced US tariffs from 145% to 30%, while China lowered its tariffs on US exports from 125% to 10%. Furthermore, the US has formed a new trade deal with the United Kingdom, although high tariffs are still predicted to remain in effect.

In light of these developments, the White House has taken steps to inform other nations about the new tariff rates. However, average tariffs remain historically high, which continues to raise concerns among many Americans regarding the future economy. Recent data indicates a decline in the value of the US dollar, causing adverse effects on global markets.

Public Perception and Future Outlook

The mood surrounding the economy has shifted as evidenced by a CBS News poll conducted in April, indicating that 44% of Americans approved of Trump’s economic management, a decrease from 51% in early March. Many individuals express worries about the broader impact these increased tariffs could have on economic stability moving forward.

Amid the uncertain economic climate, the chief economist at High Frequency Economics forecasts that consumer spending may remain constrained due to the prevailing cautious mindset. This hesitance to engage in significant financial commitments could further hinder economic recovery and growth, leading to longer-term implications for the market.

Overall, while retail sales have registered some gains, the persistent decline in consumer sentiment signals potential challenges ahead for the US economy. With trade tensions remaining a central issue and inflation concerns mounting, the outlook for consumer confidence and spending will crucially depend on future developments in trade relations and economic policy.