According to the latest University of Michigan Consumer Sentiment Survey, consumer sentiment fell sharply in March, with Democrats' expectations of the economy reaching an all-time low, highlighting unprecedented partisan disparities in the economic outlook.
The survey's headline index fell to 57.9, down from 64.7 in February, reaching its lowest level since November 2022.
In contrast, Republican expectations remained high at 95.7, indicating a 67.5-point gap. This is the largest partisan division ever recorded in the investigation. Independent voters have fallen expectations to 51.8, bringing closer to Democrats in years than Republicans.
Democratic sentiment of historic lowness
At 28.2, the Democrats' expectations index is at the lowest ever recorded, surpassing previous lows seen at the 2008 financial crisis, the 2016 Donald Trump election, and the depths of the 2020 pandemic recession.
Historically, consumer expectations have tended to be tracked through partisan control of the White House. Just as democratic sentiment surged after Biden's 2020 victory, Republican trust surged after the 2016 election. But the current 67.5-point gap is well beyond the 64.6-point gap in early 2017, when Republican confidence surged following Trump's first inauguration.
The findings highlight the dramatic contrast in economic perceptions under President Trump's second term. Republicans remain broadly optimistic, reflecting expectations for lower taxes, deregulation and business-friendly policies. In contrast, Democrats are becoming increasingly pessimistic, citing inflation, trade policies and broader economic uncertainties.
Inflation expectations will reverse in line with party policy
For most of President Biden's term, Republicans expected consistently higher inflation than Democrats, consistent with concerns about government spending and Federal Reserve policy. These concerns were largely validated by sustained inflationary pressures from 2021 to 2023.
But now this trend has turned dramatically. Democrats now expect inflation to rise 6.5% from next year, a sharp rise over the past few months. In contrast, Republicans expect inflation to be just 0.1%, indicating that concerns about rising prices will collapse almost entirely. Independences expect an inflation rate of 4.4%, making them closer to the Democrats.
This partisan inversion is the most sharpest in recent history. From 2021 to 2023, Republicans routinely expressed higher inflation expectations than Democrats. Currently, the spread between the two groups has shifted to the biggest negative gap on record – 6.4 percent points (from Republicans to Democrats to Democrats).
Rising inflation expectations raise concerns
The decline in sentiment coincides with rising inflation expectations across all political groups. Consumers currently expect prices to rise by 4.9% from 4.3% in February from the highest level since 2022. Long-term inflation expectations jumped from 3.5% to 3.9%, marking the largest month's increase since 1993.
Democrats and independents were most affected by these inflation concerns, with their expectations indexes falling 24 and 12 points respectively. Republicans are a little less optimistic than last month, but are far more confident about the economic trajectory.
Uncertainty about policies and markets
The survey also found growing uncertainty about government policies, trade and financial markets. Almost 48% of respondents voluntarily mention tariffs as a source of concern, reflecting uncertainty about tariffs from Mexico and Canada on Trump's newly announced 25% tariffs and the addition of 10% of Chinese goods.
The market reflects some of this uncertainty. The S&P 500 rebounded on Friday after a volatile trading week, but the US dollar weakened amid speculations about future Federal Reserve policies. Fed officials have indicated that interest rate cuts could occur later this year, but longer inflation expectations could complicate plans.
Consumer trust has now declined for the third consecutive month, with overall sentiment falling by 22% since December. If spending patterns follow emotional trends, the economy could face weaker consumer demand in the coming months, even if politics is a major factor in decline.
