Consumer Sentiment Declines to Record Low
In April, consumer sentiment dropped compared to March, hitting an all-time low as worries about gasoline prices and the economic implications of the Iran war took center stage.
The University of Michigan’s final sentiment index for April recorded a value of 49.8, down from 53.3 in March. Remarkably, this is the lowest final figure recorded since 1978, although there was a slight recovery since earlier in the month when preliminary figures were even lower.
“Sentiment has regained a bit of its earlier losses following a two-week cease-fire announcement and a slight dip in gas prices,” noted Michigan’s research director, Joan Hsu. “The ongoing conflict in Iran seems to be affecting consumer perceptions mainly through spikes in gasoline and possibly other prices. On the contrary, military actions or diplomatic advancements that don’t alleviate supply issues or reduce energy costs likely won’t uplift consumer spirits.”
The unemployment rate remained low, and consumer spending was robust in March. Data on weekly jobless claims indicates layoffs are still at historic lows. Though headline inflation has risen due to increased gasoline prices, core inflation indicators haven’t displayed significant upward pressure. Still, consumers express anxiety about growing inflation and potential job losses.
Consumers anticipate inflation to rise at an annual rate of 4.7% over the next year, an increase from 3.8% in March but a minor decrease from 4.8% in mid-April. Long-term inflation expectations also went up, reaching 3.5% in April, the highest since October 2025. Before the US and Israeli strikes on Iran, long-term inflation expectations hovered around 3.2% to 3.3%.
Overall, consumer perceptions of the current economic situation fell by 5.9% from the prior month, while expectations for future economic developments dropped by 7%. Nonetheless, both indicators remain above last year’s numbers.
Su mentioned that the sentiment decline was broad-based. “We observed a drop in sentiment cutting across political parties, income levels, ages, and educational backgrounds,” he said.
Data indicate that both current and expectation measures have decreased for both Republicans and Democrats. Independents showed a slight increase in the current situation index, but this was counterbalanced by a fall in the expectations index.
