U.S. Consumer Sentiment Hits Five-Month High, but Tariff Concerns Persist
Consumer sentiment in the U.S. climbed to its highest level in five months in July, though it remains significantly below long-term averages, as uncertainty over the economic impact of widespread tariffs continues to weigh on public confidence.
The University of Michigan’s consumer sentiment index rose to 61.8 in July, up from 60.7 in May and ahead of economist expectations of 61.4.
Meanwhile, inflation expectations showed signs of easing. The one-year outlook declined for the second straight month to 4.4%, down from 5.0%, while the five-year forecast ticked lower to 3.6% from 4.0%. Both metrics marked their lowest levels since February, though they remain elevated compared to December 2024, suggesting ongoing public concern about longer-term inflation risks.
Joanne Hsu, Director of the University of Michigan’s Surveys of Consumers, noted that confidence is unlikely to improve meaningfully until consumers feel inflation is under control—something that may depend on the stability of U.S. trade policy.
“Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future,” she said.
Hsu also observed that recent political developments, including President Donald Trump’s budget bill, have had little visible effect on consumer sentiment.
Economists have cautioned that Trump’s sweeping tariff strategy could exert upward pressure on inflation and potentially slow economic growth. However, recent economic data has offered some reassurance.
Retail sales in June exceeded forecasts, and weekly jobless claims came in lower than expected. Inflation data was largely in line with projections, though some goods appear to be getting more expensive due to tariff-related effects.
Attention is now turning to the looming August 1 deadline, when Trump’s “reciprocal” tariff hikes are set to take effect. The White House has hinted that new trade agreements with individual countries could be finalized before then. So far, preliminary deals have been struck with the UK, China, Vietnam, and Indonesia.
Major trading partners like the European Union, however, have yet to reach an agreement, leaving the door open for increased levies if negotiations fail.
