Consumer sentiment fell for a fifth straight month as ongoing economic uncertainty and inflation worries continue to drag down consumer attitudes. The Michigan Consumer Sentiment Index dropped to 50.8 in May, the second lowest reading on record. This represents a 2.7% (1.4 points) decline from April and is lower than the 53.1 forecast. Furthermore, consumer sentiment has fallen by 26.5% (18.3 points) compared to a year ago.
The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the U.S. with regards to the economy, personal finances, business conditions, and buying conditions, conducted by the University of Michigan. There are two reports released each month; a preliminary report released mid-month and a final report released at the end of the month.
Joanne Hsu, the director of surveys, made the following comments:
Consumer sentiment was essentially unchanged this month, inching down a scant 1.4 index points following four consecutive months of steep declines. Sentiment is now down almost 30% since January 2025. Slight increases in sentiment this month for independents were offset by a 7% decline among Republicans. While most index components were little changed, current assessments of personal finances sank nearly 10% on the basis of weakening incomes. Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy. Note that interviews for this release were conducted between April 22 and May 13, closing two days after the announcement of a pause on some tariffs on imports from China. Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture – consumers continue to express somber views about the economy. The initial reaction so far echoes the very minor increase in sentiment seen after the April 9 partial pause on tariffs, despite which sentiment continued its downward trend.
See the chart below for a long-term perspective on this widely watched indicator. We've highlighted the index's value at the start of each recession and included a callout to the most recent 12 months. At 50.8, the current level is below the index's value at the start of all six recessions since its inception.
To put today’s report in historical context, consumer sentiment is currently 39.9% below its average reading of 84.5 (arithmetic mean) and 39.0% below its geometric mean of 83.4, based on data dating back to 1978. The current index level is at the 0th percentile of the 569 monthly data points in this series.
This indicator is somewhat volatile, with an average monthly change of 3.1 points. The latest data shows a 1.4-point decrease from the previous month. To visualize the volatility, here’s a chart with monthly data and a three-month moving average. The bottom half of the chart includes real GDP, which allows us to evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Each month, the survey results highlight sentiment within each political party. To provide additional context, I’ve included a chart that shows the presidencies over our timeframe. As you can see, sentiment has fluctuated both positively and negatively under both Republican and Democratic administrations.
Michigan Consumer Sentiment Index: Components
The Michigan Consumer Sentiment Index consists of two sub-indexes: the Current Economic Conditions Index (CECI) and the Consumer Expectations Index (CEI). The CECI reflects consumers' views of their current financial situation and the overall economy, while the CEI gauges their outlook for the future.
In May, the CECI dropped to 57.6, the lowest reading since June 2022. This represents an 3.7% decline from the previous month and a 17.2% decline from a year ago. This reading was below the forecast of 59.6.
Meanwhile, the CEI fell to 46.5, the lowest reading since 1980. This represents a 1.7% decline from the prior month and a 32.4% drop from one year ago. This reading was below the forecast of 48.0.
Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations surged from 6.5% last month to 7.3% this month. This month’s rise was seen among Democrats and Republicans alike. Long-run inflation expectations lifted from 4.4% in April to 4.6% in May, reflecting a particularly large monthly jump among Republicans. The final release for May will reveal the extent to which the May 12 pause on some China tariffs leads consumers to update their expectations.
Other Sentiment Indicators
For an additional perspective on consumer attitudes, see the most recent Conference Board's Consumer Confidence Index. Both indexes gauge consumer attitudes toward the current and future strength of the economy. However, the Consumer Confidence Index is more influenced by employment and labor market conditions while the Michigan Sentiment Index is more focused on household finances and the impact of inflation.
The Conference Board index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan index.
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB business optimism Index (monthly update here).
The next update to this report will be published on May 30th.
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
