Consumer Sentiment Is Lukewarm in May — Here’s What to Know

Consumer sentiment, also known as consumer confidence, measures how U.S. consumers feel about the economy, wages, jobs and their personal finances.

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Updated · 5 min read
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Updated on June 9.

Consumers are cautiously optimistic about their future

The New York Fed’s Survey of Consumer Expectations for May showed that consumers are more optimistic about price increases, their job security and their own personal finances:

  • Inflation: While consumers still expect prices for rent, medical care and homes to rise, the growth expectations declined compared to previous reports. However, consumer expectations about food price increases over the next year are at their highest level since October 2023. 

  • Job security: Workers’ expectations of unemployment dropped by 3.3 percentage points to 40.8%, while the mean probability of job loss over the next 12 months went down by 0.5 percentage points to 14.8%. The chance that workers will quit their jobs in the next year increased by 0.1 percentage point to 18.3%, which demonstrates workers are confident about the labor market. 

  • Personal finances: Households say they are likely to access credit more easily than they did a year ago, but still expect access to credit to be more difficult in the next year. They are less likely to miss a minimum debt payment and reported being better off compared to a year prior.

Consumers still concerned about tariffs, but less about the budget

The University of Michigan’s Index of Consumer Sentiment showed consumers are still worried about the future of the economy. Inflation expectations increased slightly at 6.6%, compared to 6.5% last month. But expectations about inflation in the long run declined 2 percentage points for the first time in four months.

The survey found that consumers are expecting tariffs to pass down into prices they pay for every day goods and services, which shows President Donald Trump’s trade policy is impacting their outlook for the economy. But the budget discussions in Congress? Not so much.

The University of Michigan Index of Consumer Sentiment’s final reading for May registered at 52.2, matching April’s reading, according to the latest survey released on May 30. The university’s Index of Current Economic Conditions decreased to 58.9 in May, compared to 59.8 in April, while the Index of Consumer Expectations went up slightly to 47.9 in May, compared to 47.3 in April. The Consumer Sentiment index is now 2.2 percentage points higher than its all-time historic low of 50 in June 2022.

Consumers are changing their approach to shopping and saving

Consumers have changed some of their personal finance actions in recent weeks, according to The Conference Board’s Consumer Confidence report for May.

People who can afford to save are doing so. Among the survey responses, 36.7% said they’re putting money aside to pay for future expenses. Among those who reported saving, some 44.1% had annual earnings above $125,000.

Consumers are putting off purchases and digging into savings. Among responses, 26% say they canceled or postponed major purchases and more than one in four had to dig into their savings to pay for goods and services. The majority of these people who said they took those actions reported earning under $50,000.

Consumers are price conscious, but confident about work. Consumers say they are most worried about affording goods and services, but less concerned about losing their jobs. Some 18.3% said they were extremely worried about not being able to afford goods and services they’d need. But only 10.2% said they were extremely worried about job loss.

The Conference Board’s Consumer Confidence Index went up by 12.3 points in May to 98, the latest report released on May 27 shows. By comparison, in April, the CCI was 85.7. The board’s Present Situation Index — measuring consumers’ current assessment of business and labor market conditions — went up 4.8 points to 135.9 in May. The Expectations Index — measuring consumers’ short-term outlook for income, business and labor market conditions — went up to 72.8 in May from 54.4. The same index was 54.4 in April, the lowest level in nearly 14 years. When the Expectations Index sits below the threshold of 80 — as it did in February, March, April and May — it signals a recession may be ahead.

What is consumer sentiment?

Consumer sentiment, also known as consumer confidence, is an index of how U.S. consumers are feeling about the current and future state of the economy, and all that folds into the economy: the job market, wages, business conditions and their personal finances. It’s a valuable tool for economists, as consumer sentiment can be used as an early predictor of economic changes.

How people feel about the economy can directly impact the economy, because consumers' attitudes often affect how much they spend on things like food, transportation, household goods, entertainment and more. In 2023, consumers’ personal spending made up 67.9% of the U.S. GDP, or gross domestic product, according to the Federal Reserve Bank of St. Louis. That’s a significant majority of the nation’s GDP, so keeping a close eye on consumer sentiment is key in foreseeing potential economic slumps or rallies.

When the economy is in a recession, consumer sentiment falls. On the flip side, when the economy is expanding, consumer sentiment rises. The index does typically peak before a recession, though. Unlike other indexes, such as the Consumer Price Index (CPI), consumer sentiment isn’t calculated using spending data or hard figures. Instead, economists rely on two major surveys of consumer confidence: The University of Michigan’s Surveys of Consumers and the Conference Board’s Consumer Confidence Survey. Each survey collects the general attitudes and opinions of hundreds of U.S. consumers. Then, those opinions are assigned numeric values and aggregated into one number, or index.

What is consumer sentiment like right now?

The University of Michigan’s Index of Consumer Sentiment

The final reading for May from the University of Michigan released on May 30 shows:

  • The Index of Consumer Sentiment registered at 52.2 for May, unchanged from its April reading.

  • Current Economic Conditions registered at 58.9 compared to 59.8 in April.

  • The Index of Consumer Expectations was at 47.9 compared to 47.3 in April.

The Index of Consumer Sentiment is one of three indexes derived from the University of Michigan’s Surveys of Consumers, which started in 1946. Originally conducted annually, the surveys switched to a monthly cadence in 1978. The surveys have a sample size of roughly 600 people selected randomly from the 48 adjoining U.S. states and the District of Columbia.

The surveys include roughly 50 questions covering personal finances, business conditions and buying conditions. From those surveyed, three indexes are produced: the Index of Consumer Sentiment, the Index of Consumer Expectations and the Index of Current Economic Conditions.

The Index of Consumer Sentiment is the most commonly cited index of the bunch. It’s derived from these five questions:

  1. "We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"

  2. "Now, looking ahead: Do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"

  3. "Now, turning to business conditions in the country as a whole. Do you think that during the next twelve months we'll have good times financially, or bad times, or what?"

  4. "Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"

  5. "About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"

Historically, the surveys have been conducted by phone. Starting in July 2024, they'll be conducted online, with researchers aiming for 900 to 1,000 respondents.

The Conference Board’s Consumer Confidence Index

Conference Board data for May, released on May 27, shows:

  • The Conference Board’s Consumer Confidence Index went up by 12.3 points in May to 98. In April the CCI was 85.7.

  • The Present Situation Index registered at 135.9 in May, compared to 131.1 in April. 

  • The Expectations Index increased to 72.8 in May from 54.4 in April.

The report notes that preliminary results were collected after President Donald Trump paused some tariffs on Chinese imports. Since the response cutoff on May 19, Trump has also threatened 50% tariffs on the European Union.

The Conference Board’s Consumer Confidence Survey was launched in 1967 as a mail survey conducted every other month. Today, the survey is conducted online, on a monthly basis, with a sample size of roughly 3,000 respondents.

The Conference Board issues a five-question survey to calculate three distinct indexes: the Consumer Confidence Index, the Present Situation Index and the Expectations Index. Once the surveys have been completed, each question is given a relative value. Then, those values are compared against their relative values from 1985 — the survey’s benchmark year, with an index set at 100.

The Consumer Confidence Index is the average index for all five questions. The Present Situation Index is calculated using the average indexes for the first two questions, and the remaining three questions determine the Expectations Index.

Present Situation Index

  1. Respondents’ appraisal of current business conditions.

  2. Respondents’ appraisal of current employment conditions.

Expectations Index

  1. Respondents’ expectations regarding business conditions six months hence.

  2. Respondents’ expectations regarding employment conditions six months hence.

  3. Respondents’ expectations regarding their total family income six months hence. 

Consumer Confidence Index

This is the average index for all five questions above.

The Federal Reserve Bank of New York’s Survey of Consumer Expectations

The highlights for May from the Federal Reserve Bank of New York’s Survey of Consumer Expectations released on June 9 shows:

  • Inflation. Median inflation expectations declined in the one-year horizon (down 0.4 percentage points to 3.2%), three-year horizon (down 0.2 percentage point to 3%) and five-year horizon (down 0.1 percentage point to 2.6%). 

  • Commodity prices. Year ahead price expectations decreased in multiple categories including gas (down 0.8 percentage point to 2.7%); medical care (down 1.3 percentage points to 7.4%; the cost of college (down 1.6 percentage points to 7.5%); and rent (down 0.6 percentage point to 8.4%). Food price expectations went up 0.4 percentage point to 5.5%..

  • Home price growth. Median year-ahead home price growth expectations went down by 0.3 percentage point to 3%. 

  • Earnings expectations. Median one-year-ahead expectations for earnings growth went up by 0.2 percentage point to 2.7%.

  • Unemployment expectations. The mean probability that the unemployment rate will increase a year from now decreased by 3.3 percentage points to 40.8%.

  • Probability of job loss. The mean expectation of job loss over the next 12 months decreased by 0.5 percentage points to 14.8%.

  • Probability of quitting. The mean expectation of quitting a job over the next 12 months went up by 0.1 percentage point to 18.3%. 

  • Probability of finding a job. The mean expectation of finding a job over the next 12 months increased by 1.5 percentage points to 50.7%.

  • Household spending growth. Households expect to spend 5% more over the next year, a 0.2 percentage point decline compared to the previous month’s one-year expectations.

  • Credit access. Households reported it is slightly easier to get credit now compared to a year ago, but they expect it will still be hard to get credit in the next year. 

The Federal Reserve Bank of New York’s Survey of Consumer Expectations focuses on expectations about economic outcomes.

The survey, which is conducted by NielsenIQ, launched in 2013. It’s an internet-based survey that asks a rotating panel of 1,300 heads-of-household about their expectations of the economy, as well as their own personal finances related to the following categories:

Inflation:

  • Inflation expectations. 

  • Inflation uncertainty. 

  • Probability of different inflation outcomes. 

  • Home price change expectations. 

  • Home price change uncertainty. 

  • Commodity price change expectations. 

Labor market:

  • Earnings growth expectations. 

  • Earnings growth uncertainty. 

  • Job separation expectations. 

  • Job finding expectations. 

  • Moving expectations. 

  • Expectations of higher unemployment. 

Household finance:

  • Household income growth expectations. Household spending growth expectations. Change in taxes. Change in credit availability. Debt delinquency expectations. Expectations of higher interest rate on savings accounts. Household financial situation.Expectations of higher stock prices. Government debt growth expectations.

When do the next consumer sentiment reports come out?

The University of Michigan’s next set of results for its Surveys of Consumers will be released on Friday, June 14. The Conference Board will release its next Consumer Confidence Survey on Tuesday, June 24. The New York Fed will release its next Survey of Consumer Expectations on July 8.