Consumer Sentiment Flashing Recession Signals? Economist Explains Latest Data | Joanne Hsu

Summary

Joanne Hsu, Director of the University of Michigan Surveys of Consumers, explains that U.S. consumer sentiment remains depressed in July 2025 due to widespread concerns about tariff-driven inflation and labor market weakness. While sentiment has ticked up from recent lows as worst-case tariff scenarios haven't materialized, it remains well below historical averages. Hsu notes that consumers across income and political spectrums share tariff concerns, and that weak labor market expectations could dampen future consumer spending. The survey is a forward-looking indicator that the Fed monitors closely.

• Consumer sentiment remains low but improved slightly in July 2025.
• Tariff policy uncertainty is the top concern across all demographic groups.
• Consumers expect inflation to rise due to tariffs and labor market to weaken.
• High-wealth sentiment rebounded with financial markets, but concerns persist.
• Survey is a forward-looking indicator with predictive power for spending.
• Weak labor market expectations may limit consumer spending ahead.
• Partisan differences in sentiment exist but all groups declined this year.