U S. consumer sentiment plunges to lowest since pandemic amid rising anxieties over tariffs

Gain an edge with CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange. In addition to the other readings, the survey showed unemployment fears rising to their highest since 2009. “Consumers have spiraled from anxious to petrified,” wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. Capital One Shopping gets you better offers, automatically bdswiss forex broker review applies the best coupon code at checkout, and lets you know when prices drop on products you’ve viewed and purchased.

Nearly two-thirds of consumers expect unemployment to rise in the year ahead, more than double the reading from six months ago. In an alarming development, consumers are increasingly worried that their income prospects may be worsening as well, Hsu said. Critically, these consumers generally expect tariffs to generate substantial upward pressure for inflation in the future and to weaken the outlook for economic growth as well. While consumers may have seen the April 9 announcement of a partial pause on tariff increases as a positive development, the announcement was not enough to settle consumers’ concerns over the potential impact of trade policy on the economy, Hsu said.

Consumer sentiment grew even worse than expected in April as the expected inflation level hit its highest since 1981, a closely watched University of Michigan survey showed Friday. The University of Michigan’s Consumer Sentiment Index provides a month-to-month measurement of U.S. consumer confidence dating back to the mid-20th Century. According to Sweet, consumers’ perception of inflation has historically been driven by food and gasoline prices, as opposed to U.S. trade policies. “Tariffs and the drop in equity prices are not sitting well with consumers,” said Ryan Sweet, chief U.S. economist at Oxford Economics, in a note. “I think there’s a great optimism in this economy,” said White House press secretary Karoline Leavitt, when asked about consumer survey. She noted President Trump’s earlier comment that Americans should expect a period of “transition” as he seeks to renegotiate trade deals with countries across the world.

• Perhaps one of the reasons for this anomaly is that the link between overall consumer sentiment and sentiment regarding income seems to have broken in mid-2022, which is evident in the inset box that shows the series from 2019 onwards.
• It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected.
• The Expectations Index fell to 47.3, down from 52.6 in March and below last April’s 76.0.
• Only 14 percent of respondents said their incomes went up more than prices, 33 percent said their incomes went up about the same as prices, and 53 percent said their incomes went up less than prices.
• But as the right panel of Figure 6 shows, respondents who said they took on additional jobs or now regularly work more hours per week were more likely to say they were doing worse.

Related Data and Content

People’s negative sentiment seems to be driven by the perception that incomes have not kept up with prices, even though real spending has increased, and by the effort they exerted to adapt to rising prices. Although sentiment improves with higher incomes, the more people said they had to make changes to their behaviors since 2019 to reduce spending, the worse is their sentiment. Moreover, those who experienced increases in their incomes still reported negative sentiment, citing the need to work more hours or take on additional jobs to earn extra income. This situation may reverse as inflation continues to decline or if the labor market weakens. Figure 1 plots three lines from the University of Michigan’s Survey of Consumers.

This situation similarly occurred during the inflationary episodes of the 1970s and early 1980s. Most respondents felt their annual income did not keep up with their spending but recall that consumers tend to over-estimate the extent of retail price inflation they experienced. Only 23 percent of respondents reported that their incomes grew at the same rate or faster than their spending. The more consumers said their income did not keep up with spending, the greater the share who said they were doing worse or much worse in today’s economy compared with 2019.

Consumer sentiment fell to historic lows in mid-2022, lower than during the Great Financial Crisis and during the depths of the pandemic. In late-2024, consumer sentiment remained substantially lower than pre-pandemic levels. Historically, consumer sentiment moves in tandem with concerns regarding lower income and higher prices on household finances, and sharp drops in consumer sentiment tend to precede or coincide with recessions. This time, the sustained drop in consumer sentiment following the pandemic has not preceded or coincided with a recession. Perhaps one of the reasons for this anomaly is that the link between overall consumer sentiment and sentiment regarding income seems to have broken in mid-2022, which is evident in the inset box that shows the series from 2019 onwards. Since mid-2022, consumer sentiment has been moving more closely with sentiment regarding higher prices than with sentiment regarding income.

Releases

“Forecasting where inflation was headed since the pandemic has been a humbling experience for economists and financial markets, but consumers have done a fairly good job,” said Sweet. “Therefore, the rise in near-term inflation expectations should not be ignored and is being driven by tariffs.” American consumers expect prices to rise by 6.7% over the next year, according to a closely watched survey of consumer sentiment from the University of Michigan.

While it is important to recognize how consumers feel, we should exercise caution when using consumer sentiment surveys to infer future consumer behavior given this recent disconnect between what consumers say and do. Consumer confidence has plummeted in recent months, Michigan researchers report, amid spiraling fears about President Donald Trump’s campaign of import tariffs. The university’s index of consumer sentiment fell to 50.8 in April from 57 in March. The Trimmed Mean PCE inflation rate produced by the Federal Reserve Bank of Dallas is an alternative measure of core inflation in the price index for personal consumption expenditures (PCE). The data series is calculated by the Dallas Fed, using data from the Bureau of Economic Analysis (BEA).

Consumers, economists growing worried about inflation

The analysts warn of consumer spending “increasingly restrained by caution under the Trump economic agenda.” And Americans now expect long-term inflation to reach 4.4%, up from 4.1% last month, a move that may be of particular concern for the U.S. While the April decline in current conditions was relatively modest, the expectations index plummeted with drop-offs in personal finances as well as business conditions, said economist Joanne Hsu, director of the University of Michigan’s Surveys of Consumers.

Board of Governors of the Federal Reserve System

“Keeping inflation expectations anchored is critical for the Fed and one reason we don’t anticipate the central bank cutting interest rates until December.” The Fed pays close attention to inflation expectations, because they can become self-fulfilling. If people expect prices to rise, they often take steps that can push up prices, such as accelerating purchases or seeking higher wages. In another consumer confidence survey, from The Conference Board in March, Americans said they expect prices to rise by 5.1% in the next year.

Every month, the University of Michigan’s Surveys of Consumers asks Americans to predict the rate of inflation over the next year. As recently as December, consumers expected an annual inflation rate of 2.8%. The survey figure rose to 4.3% in February, 5% in March and 6.7% in April, based on preliminary data. In this note, we summarize our observations from an economic sentiment survey linking panelists’ responses to verified purchases. Consumer sentiment deteriorated since 2019, but spending remained strong even among those who felt they were doing much worse or experienced income losses as of 2024. This disconnect between what consumers have been saying and doing suggests that consumer sentiment surveys on their own have become weaker indicators of future consumer behavior and of the health of US consumers.

• Of those who reported their incomes went up less than prices, 65 percent said they felt worse or much worse in 2024 compared with 2019.
• Consumer spending makes up roughly two-thirds of the domestic economic output for the United States.
• “In our models, they foreshadow economic contraction ahead and a recession will give the Fed something to think about.”
• In this note, we summarize our observations from an economic sentiment survey linking panelists’ responses to verified purchases.
• The inflation rate is then calculated as a weighted average of the remaining components.
• Over the past few years, there has been a change in how overall consumer sentiment corresponds with sentiment regarding incomes and prices.

Of those who reported their incomes went up less than prices, 65 percent said they felt worse or much worse in 2024 compared with 2019. On average, respondents felt the prices they paid have increased more than their incomes, and they feel worse or much worse than they did in 2019. The survey’s mid-month reading on consumer sentiment fell to 50.8, down from 57.0 in March and below the Dow Jones consensus estimate for 54.6. The move represented a 10.9% monthly change coinmama exchange review and was 34.2% lower than a year ago. It was lowest reading since June 2022 and the second lowest in the survey’s history going back to 1952. “The bond market doesn’t believe tariffs will cause persistently higher inflation, but consumers are less convinced,” said Sweet.

The Current Index fell to 59.8, down from 63.8 in March and below last April’s 79.0. The Expectations Index fell to 47.3, down from 52.6 in March and below last April’s 76.0. This month’s figure includes the 59% of Independents and 44% of Republicans who referenced tariffs, showing that these tariff concerns are widespread and span the political spectrum, Hsu said.

Consumer sentiment fell for the fourth straight month, plunging 8% from March and reaching its lowest reading since July 2022. This week, by contrast, the investment firm Vanguard predicted prices will rise nearly 4% in 2025. The Consumer Sentiment Index fell to 52.2 in the April 2025 survey, down from 57.0 in March and below last April’s 77.2.

The University of Michigan’s closely watched consumer sentiment index, released Friday, fell 11% to 50.8, the lowest since the depths of the pandemic. The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current Index and Expectations Index, the minimum is 6 points.

Over the past few years, there has been a change in how overall consumer sentiment corresponds with sentiment regarding incomes and prices. Usually, consumer sentiment moves closely with sentiment regarding income growth. More recently, kvb forex sentiment has been moving closely with sentiment regarding price levels. The White House responded to the sagging consumer confidence figures by noting the latest monthly inflation report, which showed prices easing in March.