Inflation Fears Grip U.S. as Consumer Sentiment Sinks

U.S. consumer sentiment took a sharp downturn in May as inflation expectations soared, reaching highs not seen since 1981. The University of Michigan's latest survey revealed a notable drop in morale among Republicans, reflecting growing concerns about President Donald Trump's trade policies.

For the first time since Trump's 2016 electoral victory, the sentiment among Republicans fell sharply. This dip in consumer confidence signals a potential pullback in spending, which could dampen expectations for economic recovery this quarter. As tariffs drove up import costs, businesses raced to beat potential hikes, resulting in stagnant retail sales in April.

Christopher Rupkey, chief economist at FWDBONDS, noted, "The consumer is plainly worried...shortages could develop within months." This message was echoed by Fed Chair Jerome Powell, highlighting the challenges of managing supply shocks. The ripple effects are being felt in industries like housing, where builders are facing uncertainty over material costs.

(With inputs from agencies.)