Key Takeaways

The freefall in sentiment leveled off in May as consumers worried less about price increases from tariffs, but still felt uneasy about the economic outlook.

The final Michigan Consumer Sentiment Index for May improved slightly from the preliminary results released two weeks ago to 52.2, matching the final results from April. The reading ends four straight months of declines for the closely watched consumer survey.

The improved sentiment reflected President Donald Trump’s move on May 12 to temporarily reduce tariffs on China to 30% from 145%. It shadows a similar improvement in the Conference Board’s Consumer Confidence report, which rose by more than 12 points in May on the temporary tariff truce.

Consumers also felt a little better about inflation at the end of the month, with year-ahead expectations for price increases coming in at 6.6%, lower than the preliminary reading but higher than April’s inflation expectations. Long-term inflation expectations ticked lower in the report.

“In the second half of the month, sentiment lifted and inflation expectations eased in the wake of the May 12 pause on some tariffs on goods from China,” said Joanne Hsu, director of the University of Michigan Survey of Consumers. “With continued policy uncertainty, however, consumers continue to expect an economic slowdown to come.”

Uncertainty has spread since consumers were asked about their outlook. Courts have gotten involved in tariffs, and Trump has called the tariff pause on Chinese goods into question.

Consumers Still Anticipate a Weakening Economy

While expected short-term business conditions improved, likely from the pause in tariffs, they were offset by declines in consumers’ current personal finances that stemmed from stagnant wages, the report said.

About 64% of consumers said they expect business conditions to worsen in the year ahead, the same as last month, but more than double the 29% who expressed similar concerns six months ago.

“Consumers still expect the economy to weaken and foresee weaker business conditions and income growth as they express ongoing frustration with the cost of living,” said Oren Klachkin, financial market economist for Nationwide. “However, the survey suggests consumer attitudes may improve if trade deals are announced and tariff uncertainty diminishes.”