US consumer sentiment slides to 3-year lows as trade war raises inflation anxiety

WASHINGTON AP U S consumer sentiment fell slightly in May for the fifth straight month surprising economists as Americans increasingly worry that President Donald Trump s pact war will worsen inflation The preliminary reading of the University of Michigan s closely watched consumer sentiment index disclosed Friday declined on a monthly basis to the second-lowest level in the nearly -year history of the survey The only lower reading was in June Since January sentiment has tumbled nearly Americans have largely taken a sour view about where the financial market is headed in the wake of the Trump administration s imposition of huge import duties which threaten to slow improvement and push up prices In new weeks the White House has pulled back on its largest part draconian policies though average duties are still high by historical standards Consumers outlooks are also sharply divided by their political views which has caused several economists to question the survey s results The University of Michigan also last year switched from using both online and phone responses to just online which chosen analysts worry may have introduced a more negative bias The sentiment index for Democrats fell to this month the lowest since partisan material began in and far below the levels reached in the depths of the COVID pandemic or during the - Great Recession For Republicans it s though that slipped from in April and is the lowest since Trump s vote Trump had slapped tariffs on all imports from China a move that effectively suspended arrangement with the United States third-largest trading partner in goods But on Monday the two countries reported they had reached a deal that would lower U S tariffs to while China would cut its duties on U S exports to from The survey was taken between April and May which includes just two days after the China tariffs were reduced Yet on Thursday Walmart reported it had started to lift prices in response to the tariffs and will do so even more in June and July just as families gear up the back-to-school season The company counts of the U S population as customers and price hikes at the nation s largest retailer may start to sink in with Americans who have already been buffeted by post-pandemic inflation The survey exposed consumers are increasingly worried about rising inflation Over the next months consumers expect inflation to jump to the highest since and up from an expectation of last month Over the next five years they foresee inflation reaching the highest since up from last month Those expectations typically run higher than actual inflation which last month ticked down to the lowest level in more than four years Still economists and the Federal Reserve closely watch inflation expectations because they can become self-fulfilling If people are worried inflation will accelerate they may take efforts such as demanding higher pay that can push up prices Federal Reserve Chair Jerome Powell has disclosed the Michigan inflation expectation numbers are an outlier Market-based measures of future inflation which several Fed authorities put greater weight on have remained mostly stable Still the steady rise in the Michigan survey s inflation expectations could make it less likely the Fed will cut its key interest rate anytime soon Source