U.S. consumer sentiment continues its downward spiral declining each month so far in 2025 with April's preliminary estimate coming in at 50.8 vs. April's final reading of 52.2 and 57.0 in March, below expectations for 53.0 in the Econoday survey of forecasters.

Sentiment is now down by almost 30 percent since the start of the year."[C]urrent assessments of personal finances sank nearly 10% on the basis of weakening incomes," the report says."Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers' thinking about the economy."

The report notes that the survey collected responses before the announcement of the 90-day pause in higher reciprocal tariffs on goods from China.

Nevertheless, [m]any survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture consumers continue to express somber views about the economy.

The preliminary year-ahead inflation expectations surged again to 7.3 percent in May, jumping from 6.5 percent in April.

Long-run inflation expectations in May went up to 4.6 percent from 4.4 percent last month.

After dropping another 8 percent in April, the index is expected to steady at its low levels, 53.0 for confidence. Inflation expectations are seen rising again to a remarkable 6.6% from 6.5% in April and 3.3 percent in May 2024.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.