US Consumer Sentiment Craters to 50.8—Second-Worst Reading in History
Main Street’s mood hits near-record lows as inflation and economic uncertainty bite. The University of Michigan’s closely-watched index now sits just above its all-time nadir—because nothing says ’soft landing’ like consumer despair.
Wall Street analysts scramble to spin this as ’priced in’ while quietly updating their recession models. Meanwhile, Bitcoin hodlers shrug—decentralized assets don’t care about sentiment surveys.
Fun fact: This reading is lower than during 2008’s Lehman collapse. But hey, at least the Fed’s ’transitory’ narrative got its ATH before reality did.
Consumers now expect inflation to get worse, not better
Inflation expectations are rising again—and fast. The survey showed that Americans expect prices to jump 7.3% over the next year, up from 6.5% in April. That’s the highest one-year outlook in months. Long-term inflation projections also crept higher, hitting 4.6% from 4.4%. These expectations are bad news for the Federal Reserve, which keeps a close eye on them when deciding what to do with interest rates.
Jerome Powell, Chair of the Fed, has said that rate cuts won’t return unless the central bank is confident inflation expectations aren’t getting out of control. Right now, they clearly are. This puts pressure on Powell and the Fed to stay put for longer than Wall Street had hoped.
The next update to the sentiment index comes May 30, and all eyes will be on whether the tariff pause makes any difference. But even if there’s a slight uptick, people are still dealing with crippling inflation, debt, and loan collections.
Loan collections resume as Department of Education hits borrowers
Another hit came from the Department of Education, which just restarted student loan collections this month under President Donald Trump. For the first time in around five years, Americans who defaulted on their loans are getting letters, seeing their wages docked, and facing legal action. This comes at the worst possible time for people already crushed by higher prices.
Murat Tasci, senior US economist at JPMorgan and former Cleveland Fed staffer, said the collections could strip $3.1 billion to $8.5 billion in disposable income every month. That’s a blow to consumers who are already struggling to stay afloat.
If you play that out over a full quarter, he said, the economy could see a 0.7% to 1.8% drop in disposable personal income compared to last year. That’s not theoretical—it’s real money gone from real wallets.
Jeffrey Roach, Chief Economist at LPL Financial, said, “You have a number of these pressure points rising. Perhaps in aggregate, it’s enough to quash some of these spending numbers.” Roach’s comment reflects what’s happening on the ground: Americans are cutting back.
Mihir Bhatia, an analyst at Bank of America, warned that subprime borrowers are getting hit the hardest. He said in a note to clients that this wave of loan payments “will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment.” These are the same people who have little savings, no backup, and no way out.
Student loans aren’t some fringe issue either. Even though they make up just 9% of total consumer debt, once mortgages are excluded, that share shoots to 30%. Americans are carrying $1.6 trillion in student loan debt, an increase of $500 billion over the last decade, based on Bank of America numbers.
The New York Fed also flagged a spike in delinquencies. As of Q1, nearly one in four borrowers required to make payments is already behind. The share of delinquent borrowers jumped from 0.5% to 8% in just three months after the government started tracking those numbers again. That’s a sign of massive financial strain.
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