Consumer sentiment has become a vital indicator of economic health, especially in times of uncertainty. In the US, this measure reflects how optimistic or pessimistic everyday Americans feel about the economy and their financial prospects. As of 2025, the numbers reveal a story that policymakers and businesses cannot afford to ignore.
Consumer sentiment typically refers to how people perceive current and future economic conditions. Surveys, such as the University of Michigan’s closely watched consumer sentiment index, gauge these feelings by asking Americans about their expectations and experiences related to their finances, business climate, and major purchases.
When sentiment is high, consumers are more likely to spend, which boosts economic growth. If it falls, caution takes hold. Spending drops, and businesses feel the squeeze. This direct connection is why economists pay close attention to consumer sentiment as they predict the economy’s direction.
Recent data show a steep decline in US consumer sentiment. According to CNBC, the University of Michigan survey recorded the second-lowest reading on record, with inflation expectations rising sharply. The main drivers? Surging inflation and new tariffs have fueled uncertainty about the future.
Complementing this, a CNN Business report dives deeper into why Americans feel so gloomy. It explains that the almost 30% plunge in sentiment since January follows President Donald Trump’s tariffs and ongoing inflation fears. Nearly three-quarters of survey respondents mentioned tariffs as a concern, up from 60% just a month prior. The reality is clear: people are nervous about how global trade policies are hitting their wallets.
Despite these gloomy feelings, economic data tell a different story. Many analysts point out that "hard data"—like the GDP and job growth—are holding steady or improving. Business Insider highlights this disconnect, noting that, even as headlines scream recession, core metrics for economic health remain strong. However, the narrative in people's minds is often shaped by everyday experiences and media stories, not just statistics.
The effect of inflation on consumer sentiment cannot be understated. Year-ahead inflation expectations leapt from 6.5% to 7.3% in May, according to the Michigan survey cited by CNBC. Coupled with sweeping new tariffs, these factors create a sense of instability and weaken future outlooks. Many Americans worry about the purchasing power of their incomes and the possibility of a weakened job market. These concerns lead to cutbacks in discretionary spending, amplifying the impact on the broader economy.
Experts emphasize that open communication about trade policies and inflation expectations is crucial for rebuilding trust. As CNN Business notes, efforts to negotiate down tariffs and foster transparency could help restore confidence. Meanwhile, businesses and policymakers must remain responsive to these shifting attitudes. Monitoring consumer sentiment will be essential in predicting spending patterns and economic growth in the coming months.
Consumer sentiment shapes the economy as much as hard data does. While inflation and tariffs have dampened optimism in 2025, understanding the reasons behind these trends can help leaders and consumers navigate changing times. Staying informed and engaged with these fluctuations is vital for everyone with a stake in the US economy.