Consumer gloom is not quite at historic levels — but it’s awfully close.
Households are worried about inflation, about their own pressured finances as incomes and purchasing power weakens. They’re worried about tariffs.
The University of Michigan’s preliminary May reading on consumer sentiment, released Friday (May 16) came in at 50.2, down from 52.2 in April, and now is at the second lowest level recorded by the University.
The survey came in the wake of, and on the same day, that PYMNTS Intelligence debuted its own findings on how consumers are recalibrating their own spending plans in the face of those pressures, wrought by tariffs and trade wars. The volatile nature of the tariffs, levied in on-again, off-again fashion, makes that planning volatile too. We drew on the sentiments of 2,381 U.S. consumers from late April into early May.
Given the fact that imported goods account for 45% of shoppers’ purchases, according to a PYMNTS Intelligence calculation based on Bureau of Economic Analysis and census data, the impact of tariffs will be keenly felt.
Sixty percent of the consumers we queried expect to see price increases; half of those consumers fear the onset of a recession. Less than half of consumers think the tariffs will lead to more jobs.
To prepare for anticipated price increases, 38% of consumers are prepared to forgo purchases. That share rises to nearly half (46%) among those living paycheck to paycheck with difficulty. Another 31% of consumers have already switched to less expensive brands. “A small but still considerable share — 14% — have begun using credit cards or buy now, pay later more,” the report noted.
As for Michigan’s findings, the last time we’d been at this nadir was in June 2022, nearly three years ago. Consumer sentiment is now down almost 30% since January 2025.
Current assessments of personal finances dipped 3.7% in May, accumulating a 23% drop in the first five months of the year.
Perception of weakening incomes drove this decline, according to the Michigan report.
As PYMNTS recently reported, the latest figures released by the Bureau of Labor Statistics (BLS) show that even if inflation grew at its slowest pace in more than four years, key spending categories such as shelter continue to put incremental stress on household budgets, while the full impact of tariffs that escalated through the last month may not be showing up in the data yet. In fact, tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April.
As for the expectations index, this component fell by a mere 1.7% according to preliminary readings, although it remains at a level 37% below that of the end of 2024.
In fact, the provisional index for May is the lowest since 1980, signaling an unprecedented state of consumer pessimism toward the future. According to the University trade policy continues to dominate consumers’ thinking about the economy.
Joanne Hsu, director of the University of Michigan survey, said in remarks accompanying the release that “While most index components were little changed, current assessments of personal finances sank nearly 10% on the basis of weakening incomes.”
Girding for Inflation
There are indications that consumers see the purchasing power of those incomes weakening even further. Year-ahead inflation expectations surged from 6.5% last month to 7.3% this month, a register unseen since November 1981 (the second indicator showing levels resembling that of the 80s “stagflation”). Long-run inflation expectations were also lifted from 4.4% in April to 4.6% in May, marking a fifth consecutive increase.
