U.S. Consumer Sentiment Plummets Amid Tariff Concerns
U.S. consumer sentiment tumbled to the second-weakest reading on record while short- and long-term inflation expectations soared to multidecade highs on growing tariff concerns.
The preliminary April sentiment index slid 6.2 points to 50.8, according to the University of Michigan, below economists’ forecasts. Aside from a 50 reading in June 2022, that was the lowest in surveys dating back to the 1970s.
Survey Results and Tariff Concerns
The results were based on interviews from March 25 through April 8, prior to President Donald Trump’s Wednesday announcement of a 90-day pause on higher tariffs for dozens of U.S. trading partners. Duties on China have been subsequently raised to 145%.
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Consumer Anxiety and Job Market Outlook
“Consumers have spiraled from anxious to petrified,” Sam Tombs of Pantheon Macroeconomics said in a note. “People probably are even more downbeat now, given that the survey was conducted between March 25 and April 8. Some responses, therefore, likely were received before the April 2 tariff announcements and subsequent plunge in stock prices.”
Respondents were also more pessimistic on the outlook for the job market, with the share of consumers expecting higher unemployment in the coming year rising to the highest since 2009.
Moreover, respondents’ saw the odds of losing their job in the next five years at the highest since July 2020. Income expectations also deteriorated.
Unemployment Expectations and Personal Finances
“Unemployment expectations have worsened sharply over the last few months, which may not lead to a pull-back in spending if consumers do not expect to be personally affected by layoffs or income losses,” Joanne Hsu, director of the survey, said in a statement.
“Alarmingly, though, consumers are now worried that they will be personally affected.”
Economic Data and Inflation Expectations
Recent economic data showed that, as of March, job creation remained solid and inflation pressures were easing. U.S. wholesale prices fell in March by the most since October 2023, restrained by energy costs, according to a report from the Bureau of Labor Statistics earlier Friday. The consumer-price index also unexpectedly dropped last month.
But the University of Michigan survey signaled how worried Americans are about the future. Consumers expect prices to rise at an annual rate of 4.4% over the next five to 10 years, the highest since 1991 and up from 4.1% a month ago, according to the report. They saw costs rising 6.7% in the coming year, the highest since 1981. In March, year-ahead inflation expectations stood at 5%.
Tariff Concerns and Consumer Sentiment
About two-thirds of consumers spontaneously mentioned tariffs during interviews for the survey, the university said. Since the end of January, the sentiment index has declined nearly 21 points.
Prior to news on Wednesday that higher US tariff rates would be dialed back, American consumers had become more alarmed that sweeping tariffs would lead to higher prices.
Trump’s trade policy has roiled markets and intensified consumer anxiety about personal finances and the job market on prospects for a weaker economy.
The survey showed the current conditions gauge fell to 56.5 from 63.8, while the expectations index decreased to 47.2 — the weakest since 1980. Consumers’ outlook of their financial situation decreased in April to a fresh record low.
Conclusion
In conclusion, the U.S. consumer sentiment has plummeted amid tariff concerns, with short- and long-term inflation expectations soaring to multidecade highs. The survey results indicate that consumers are increasingly worried about the future, with a significant decline in the sentiment index and a rise in unemployment expectations. The tariff concerns have also led to a decrease in consumers’ outlook of their financial situation, with a fresh record low in April.
Frequently Asked Questions
Q: What is the current state of U.S. consumer sentiment?
A: The U.S. consumer sentiment has plummeted to the second-weakest reading on record, with a preliminary April sentiment index of 50.8, according to the University of Michigan.
Q: What are the main concerns of consumers?
A: Consumers are mainly concerned about tariff concerns, with about two-thirds of consumers spontaneously mentioning tariffs during interviews for the survey. They are also worried about the job market, with a rise in unemployment expectations and a decline in income expectations.
Q: How have inflation expectations changed?
A: Inflation expectations have soared to multidecade highs, with consumers expecting prices to rise at an annual rate of 4.4% over the next five to 10 years, the highest since 1991. They also see costs rising 6.7% in the coming year, the highest since 1981.
Q: What is the impact of tariff concerns on consumer sentiment?
A: Tariff concerns have led to a significant decline in consumer sentiment, with a decrease in the sentiment index and a rise in unemployment expectations. Consumers are worried that sweeping tariffs will lead to higher prices and a weaker economy.
