A new University of Michigan survey reveals a significant drop in consumer confidence, reaching its second-lowest point ever.
Confidence Takes a Nosedive
The Index of Consumer Sentiment plunged to 50.8 this month, a 26.5% decrease since May 2024. This is just a hair above the all-time low of 50 recorded in June 2022. While this month’s decline was relatively small (1.4 points), it follows several months of sharp drops. Overall, sentiment is down almost 30% since January 2025. The survey, running since 1952, shows a worrying trend. Even a slight uptick among independent voters was overshadowed by a 7% decrease among Republicans.
Personal Finances and Economic Outlook
Consumers are feeling pessimistic about their personal finances, with a 10% drop in positive assessments. Many anticipate lower incomes and a weaker economy in the near future. Trade policy uncertainty, particularly surrounding tariffs, is a major factor. Nearly three-quarters of consumers spontaneously mentioned tariffs, up from 60% in April.
Inflation Fears Rise Across the Political Spectrum
Inflation expectations are on the rise, affecting both Democrats and Republicans. Year-ahead inflation expectations jumped from 6.5% to 7.3%, while long-run expectations increased from 4.4% to 4.6%. The increase was particularly noticeable among Republicans. The lingering effects of past tariff disputes are contributing to this widespread concern.
