U.S. consumer sentiment stayed at 3-year lows in May 2025, while short-term inflation expectations surged to their highest level since 1981, according to the final report released by the University of Michigan.

The Consumer Sentiment Index for May 2025 came in at 52.2 points, upwardly revised from a preliminary 50.8 but unchanged from April, the survey showed.

This ends four months of continuous declines, though the index remains at its lowest since November 2022 and 24.5% lower than it was a year ago.

The Current Economic Conditions Index dropped 1.5% month-on-month to 58.9, again the lowest since November 2022, while the Index of Consumer Expectations improved slightly to 47.9, up 1.3% from April.

Joanne Hsu, director of the Surveys of Consumers, said that while sentiment had initially dropped in early May, it “turned a corner” later in the month.

Hsu attributed this to the temporary suspension of some tariffs on Chinese imports, which may have improved business expectations.

Yet, the expert said these improvements were “offset by declines in current personal finances stemming from stagnating incomes throughout May.”

Inflation Fears Surge To 44-Year High

Short-term inflation expectations jumped to 6.6%, up from 6.5% in April, reaching the highest level since November 1981. This reflects mounting anxiety among consumers despite relatively tame recent inflation data.

Notably, the gap between one-year inflation expectations and April's Personal Consumption Expenditures index—up just 2.1% year-over-year—stands at a historic 4.5 percentage points.

This marks the widest spread ever recorded, highlighting a severe disconnect between how Americans feel and what official data shows.

Meanwhile, long-run inflation expectations slipped to 4.2% in May from 4.4% in April, ending a rare four-month streak of increases.

Chart: Are US Consumers Disconnected From Inflation Reality?

Markets Shake Off Weak Data

Despite weak sentiment and inflation worries, markets rebound during New York morning trading.

The S&P 500 – tracked by the SPDR S&P 500 ETF Trust ( SPY ) – regained the 5,900-point level, while the Nasdaq 100 held flat near record highs at 21,360.

Shares of Palantir Technology Inc. ( PLTR ) jumped 4.6%, leading tech gains.

Meanwhile, bond markets reacted by pricing in slower economic momentum. The 30-year U.S. Treasury yield dropped to 4.91%, down sharply from last week's peak of 5.15%. The U.S. dollar also slipped.

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Image created using artificial intelligence via Midjourney.