New York Fed survey shows that American consumer expectations are declining while confidence is rising.

According to the results of the consumer expectations survey released by the Federal Reserve Bank of New York on Monday, Americans' concerns about inflation have significantly decreased due to President Trump's withdrawal of some of the most aggressive tariff proposals in May. The survey shows that Americans' inflation expectations for the next year have dropped significantly to 3.2%, a decrease of 0.4 percentage points from April; the three-year inflation expectation also decreased by 0.2 percentage points to 3%; the five-year expectation slightly decreased from 2.7% to 2.6%. Although expectations for all periods are still higher than the Federal Reserve's 2% annual inflation target, the data reflect a positive shift in consumer sentiment, indicating a significant easing compared to the widespread panic caused by Trump's tough tariff rhetoric. On April 2nd, Trump announced "Liberation Day" and proposed a 10% universal tariff on all imported goods in the US, as well as implementing "equivalent" retaliatory tariffs against dozens of countries. However, shortly afterward, he withdrew some of the latter measures and instead announced a 90-day negotiation window, which will end in July. This shift is considered one of the main factors contributing to the recent improvement in consumer expectations. The New York Fed's survey has less volatility compared to surveys conducted by the University of Michigan or the US Chamber of Commerce, providing a more stable perspective on inflation expectations. As Washington officials strive to calm external concerns about the potential inflation caused by tariffs, this report provides the White House with some breathing room. Kevin Hassett, Chairman of the White House National Economic Council, said in an interview on Monday, "Regardless of which inflation indicator you look at, inflation has seen the most significant decline in four years. Despite rising tariff revenues, inflation is decreasing, which goes against conventional wisdom, but completely matches our expectations." Data shows that the core inflation indicator preferred by the Federal Reserve, the Personal Consumption Expenditures Price Index (PCE), recorded 2.1% in April, one of the lowest levels since February 2021; the core PCE excluding food and energy was 2.5%, which is considered to better reflect long-term trends. Consumer expectations for most price categories have also decreased. While food prices are expected to rise by 5.5% in the next year, an increase of 0.4 percentage points from the previous month, reaching a new high since October 2023, the expectations for gasoline price increases have significantly slowed to 2.7%, a decrease of 0.8 percentage points. Expectations for increases in medical, tuition, and rental prices have also declined. There are also positive signals in the job market. The percentage of respondents who expect to be unemployed in the next 12 months has decreased to 14.8%, a decrease of 0.5 percentage points from last month. Other economic sectors also show optimism. For example, the likelihood of missing the lowest debt repayment in the next three months has decreased to 13.4%, the lowest level since January this year. Investment confidence has also increased. 36.3% of respondents expect the stock market to rise in a year, an increase of 0.6 percentage points from last month, indicating that consumer confidence is gradually returning.