Validate your strategy before risking real money. Massive historical data and backtesting tools to test any trading idea with confidence. Test any strategy against years of market history. American consumers remain deeply pessimistic about the economy, with the University of Michigan Surveys of Consumers hitting all-time lows in May, according to a preliminary reading. Economists point to a combination of lingering inflation scars, geopolitical disruptions, and trade policy uncertainty as reasons households have yet to regain confidence since the Covid pandemic.
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- The University of Michigan Surveys of Consumers hit an all-time low in its preliminary May reading, one of the lowest levels in the survey’s history.
- Several consumer sentiment indexes continue to show pessimism, suggesting a broad-based lack of confidence across demographic groups.
- Economists attribute the prolonged negativity to cumulative shocks: the pandemic’s economic scars, the rapid rise in prices over the past few years, and policy disruptions such as tariffs.
- While annual inflation has declined from its highs, consumers remain focused on the cumulative price increases that have eroded purchasing power since 2020.
- U.S. households have not regained pre-pandemic confidence levels, a pattern that stands in contrast to some other developed economies where sentiment has recovered more fully.
- The Conference Board’s own measures, including the Consumer Confidence Index, also reflect ongoing unease, though not as extreme as the Michigan survey.
- The persistence of pessimism raises questions about consumer spending, which accounts for roughly two-thirds of U.S. economic activity. If confidence remains low, spending patterns could shift toward more cautious behavior.
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Key Highlights
American consumers have been pessimistic for so long that economists are now questioning when—or even if—households will ever feel financially better off. The University of Michigan Surveys of Consumers, a closely watched bellwether of economic sentiment, recorded all-time lows in its preliminary May reading, released recently. This marks one of several consumer opinion surveys showing that Americans have never fully regained confidence in the U.S. economy since the Covid pandemic struck more than six years ago.
Economists told CNBC that consumers remain scarred by years of rapid price increases, even as the annual inflation rate has cooled. On top of that, Americans are worn out by a series of economic disruptions—ranging from the pandemic to ongoing geopolitical conflicts and the tariffs introduced under President Donald Trump—that have shaped the current decade.
"It's a series of shocks," said Yelena Shulyatyeva, senior economist at the Conference Board, which conducts another popular gauge of economic confidence. "Consumers don't get a break."
The persistent gloom poses a challenge for policymakers and businesses alike. While inflation has moderated from its peak, the cost of living remains elevated relative to pre-pandemic levels, and wage growth has not fully kept pace for many households. The Conference Board's own consumer confidence index has also shown subdued readings in recent months, reflecting similar anxiety.
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Expert Insights
The continued consumer pessimism described by economists suggests a deep-seated psychological impact from the economic turbulence of recent years. Yelena Shulyatyeva of the Conference Board described it as a "series of shocks" that have offered consumers "no break," implying that even favorable macroeconomic data—such as cooling inflation—may take time to translate into improved sentiment.
Investors and market participants should consider that consumer confidence often lags behind hard economic data. While inflation has moderated and the labor market has remained relatively resilient, the perception of financial well-being may take longer to recover. This disconnect could influence sectoral performance: companies reliant on discretionary spending might face headwinds, while defensive sectors could maintain relative stability.
Moreover, the ongoing tariff policies and geopolitical uncertainty may continue to weigh on household outlooks. If new trade measures emerge or if geopolitical tensions escalate, the recovery in sentiment could be further delayed. Economists suggest that sustained improvements in real wages and a visible easing of price pressures would be necessary to shift the consumer mood.
From a policy perspective, the Federal Reserve and other officials may need to consider how prolonged consumer pessimism affects economic momentum. However, caution is warranted: sentiment measures are volatile and can improve rapidly if external conditions change. The current environment suggests a cautious outlook for consumer-driven growth, with potential for a turning point if inflationary and trade uncertainties diminish.
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