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The mood among American consumers halted its months‑long slide in May, yet remained historically subdued as households continued to grapple with persistent inflation, high borrowing costs and a volatile trade environment.

According to the final May reading from the University of Michigan’s closely watched Surveys of Consumers, overall sentiment registered at 52.2, identical to April’s level and still lingered near levels last seen in the early 1980s recession.

Researchers at Michigan noted that sentiment had “ebbed through mid‑May” before ticking up in the second half of the month, coinciding with the White House’s temporary suspension of select tariffs on Chinese‑made goods announced on May 12.

“Short‑run business conditions improved after mid‑month,” survey director Joanne Hsu explained, “but that lift was offset by mounting worries about stagnant household incomes.”

The flat headline figure conceals a modest divergence inside the index.

The Expectations Index— which reflects views on income, employment and the broader economy a year ahead—rose to 47.9 from 47.3.

In contrast, the Current Conditions Index slipped to 58.9 from 59.8, reflecting unease about day‑to‑day finances as grocery and housing costs continue to bite.

Perhaps the most closely scrutinised component this month was the public’s outlook on future prices—a metric the Federal Reserve monitors for signs that inflation psychology is becoming unmoored.

One‑year inflation expectations inched up to 6.6% from April’s 6.5%, the highest since 1981, while five‑year expectations eased to 4.2% from 4.4%.

Together, these figures suggest that households still expect significant price pressures in the near term—even after headline consumer‑price growth slowed below 4% year on year— but retain cautious optimism that the Federal Reserve will eventually tame inflation.

Policymakers have signalled their intent to keep the fed‑funds rate in restrictive territory “as long as necessary,” but markets increasingly price in a first quarter‑point cut as early as September.

May’s stabilisation masked stark divisions beneath the surface.

Sentiment among Republican‑leaning respondents saw a further 7‑percentage‑point drop in confidence versus April, while sentiment among independents improved modestly and Democrats held roughly steady.

Income disparities are equally striking.

The proportion of consumers expecting their wages to rise over the next 12 months fell below 50%, compared with nearly 60% six months earlier.

“A growing share of households report that their incomes are stagnating,” Hsu warned.

Although sentiment indices are not direct predictors of  spending one‑for‑one, persistently low readings can foreshadow softer consumption—a critical risk given personal outlays account for roughly 70% of U.S. GDP.

Retail sales already decelerated noticeably in April, and several big‑box retailers have signaled that  investors expect only low single‑digit revenue growth this year.

Meanwhile, the Federal Reserve’s latest Survey of Household Economics and Decision‑making (SHED) showed 60% of adults saying higher prices had hurt their finances, forcing almost four in five to cut discretionary spending.

The Biden administration’s narrow tariff reprieve was designed to bolster fragile U.S.–China negotiations but left most levies intact, preserving upward pressure on import costs.

Fitch Ratings estimates the effective U.S. tariff rate is now its highest level in a century, intensifying fears of continued price pass-through to consumers.

Against that backdrop, the Federal Open Market Committee’s June meeting will be closely monitored for any hint that officials might expedite rate cuts should confidence falter further.

Yet, with unemployment holding below 4% and equity indices near record highs, the Fed risks reigniting demand too soon if it eases prematurely.

Economists at several Wall Street banks, including JPMorgan and Goldman Sachs, expect the consumer sentiment index to hover in the low‑50s through the summer before recovering modestly in the fourth quarter—assuming the tariff pause becomes permanent and the Fed delivers two cuts by year‑end.

However,  downside remains plentiful: a re‑escalation of trade tensions, higher energy prices during hurricane season, or a further run‑up in mortgage rates could easily tip sentiment back into decline.

For now, the May data offer a sliver of good news: the four‑month skid has halted.

Yet the underlying message from households is unmistakable—hope is fragile, and the path to a sustained recovery in confidence runs through lower inflation, steadier policy signals and, ultimately, stronger wage growth.