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Consumer confidence remained stable in May, halting four continuous months of sharp declines.

Sentiment had diminished through mid-May but made a rebound in the second half of the month following a temporary suspension of certain tariffs on Chinese imports, said economist Joanne Hsu, who leads the University of Michigan’s Survey of Consumers.

Short-term business conditions showed improvement after mid-month, likely due to the trade policy announcement, she noted. However, this favorable shift was countered by a downturn in current personal finances arising from stagnant incomes.

Overall, consumers perceive the economic outlook as no worse than last month, yet they remain quite apprehensive about the future, Hsu stated.

“Given that consumers typically anticipate tariffs impacting consumer prices, it is unsurprising that trade policies have affected their perceptions of the economy,” she added. “In the latter part of the month, sentiment improved and inflation expectations softened following the May 12 suspension of certain tariffs on goods from China. With ongoing policy uncertainty, however, consumers still foresee an economic downturn on the horizon.”

Prospects for business conditions and labor markets remain grim

Approximately 64% of consumers predict that business conditions will deteriorate over the coming year, unchanged from April, but up from 29% six months prior. Similarly, the proportion of consumers anticipating an increase in unemployment has hovered around two-thirds for three consecutive months—up from less than one-third in November 2024.

“Consumers persist in fearing that they may be personally affected by a broad economic decline,” Hsu mentioned. “In a concerning trend, consumers are increasingly anxious that their own income outlooks may be declining.”

A rising number of consumers are already reporting that their incomes are stagnant, she elaborated. Fewer than half of consumers expect their personal incomes to increase in the upcoming year, a drop from nearly 60% six months back.

Consumers remain troubled about purchasing power

Living costs and purchasing power are still primary concerns for consumers, aligning with the sentiments they have expressed since the pandemic began.

According to Hsu, consumers continue to be frustrated by enduring high prices, with 38% indicating that their financial situations have been compromised by these costs—down from 44% in November 2024 but still the most-cited issue.

About 68% of consumers anticipate that the purchasing power of their incomes will diminish over the next year, rising from 57% in November 2024. While consumers may have reacted positively to the policy announcements made on May 12, they still expect trade policies overall to result in higher prices, at least in the short term, contributing to their ongoing frustration, Hsu noted.

Consumer Sentiment Index

The Consumer Sentiment Index was recorded at 52.2 in the May 2025 survey, unchanged from April and below last May’s figure of 69.1. The Current Index fell to 58.9, down from 59.8 in April and lower than last May’s 69.6. The Expectations Index increased to 47.9, up from 47.3 in April but still below last May’s 68.8.

About the surveys

The Surveys of Consumers is a rotating panel survey conducted at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that ensures each household in the contiguous U.S. has an equal chance of being selected. Interviews take place throughout the month via the web. The minimum monthly change necessary for significance at the 95% confidence level in the Sentiment Index is 4.8 points; for the Current Index and Expectations Index, the threshold is 6 points.

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