Consumer sentiment improved slightly from the beginning of the month in late April, but was deeply depressed by widespread concerns over historic decline in inflation, tariffs and trust among Democrats.
The final read on the University of Michigan Consumer Sentiment Index rose to 52.2 in April. It marked the fourth consecutive monthly decline since July 2022 and the final final reading.
The forecast index measures economic sentiment over the coming months, falling to 47.3 in April, down from 52.6 in March. The three-month sharp decline (over 32% since January) was the sharpest decline in expectations since the 1990 recession led to the economy.
The overall slide of sentiment was driven by a confident plunge among the Democrats, largely. The reading of that index has dropped to 34.4, the lowest ever recorded level in the decades-long history of the investigation. Feelings among independents also dropped sharply to 46.2. By contrast, Republican sentiment rose to 90.2, the highest since the end of Donald Trump’s previous term.
The collapse of democratic sentiment spanned both current conditions and future expectations. The Democrats’ expectations index fell to 22.7. This is a level rarely seen in political groups in past research, with the current condition index dropping to 52.6.
Research Director Joanne Hsu reported that consumers “strengthen anxiety” about the economy, noting particularly the risks posed by trade policies and the potential for new inflation.
Consumers are also concerned about their income, and many say they expect low income growth this year.
“Without a strong income, it is unlikely that spending will be strong amid the numerous warning signs that consumers have pointed out,” she said in a statement.
Inflation expectations jumped sharply in April, but the final reads are below the preliminary figures. This could reflect a number of tariff suspensions as the Trump administration negotiates trade deals. Consumers said they expect prices to rise 6.5% next year, up from 5.0% a month ago, from its highest since 1981. For mid-month reading, the annual figure was up to 6.7%. Long-term inflation expectations rose to 4.4%, the highest since 1991.
The partisan gap is strongly and prominent in the expectations of inflation. Democrats are hoping for 8% inflation over the next 12 months. Republicans expect just 0.4%. Independents expect 6.5%.
Approximately 60% of respondents voluntarily mentioned tariffs on responses to the survey, starting from 44% in March. The survey was conducted between March 25th and April 21st. This is a period involving a period in which President Trump announced a 90-day suspension on mutual tariffs and another move to raise tariffs on Chinese goods to 145%.
Labor market expectations have also deteriorated, with nearly two-thirds of consumers saying they expect unemployment to rise over the next year. More than two-thirds say they expect inflation-adjusted income to decline.
The University of Michigan Consumer Survey is based on interviews with a nationally representative sample of US households. The next preliminary measurement of consumer sentiment will be released on May 16th.
