Consumer sentiment experienced a significant decline in April, as reflected in the University of Michigan's Surveys of Consumers. The Consumer Sentiment Index dropped to 50.8, a decrease from 57 in March, which was steeper than the anticipated drop to 54.5 predicted by economists. This marks the fourth consecutive month of declining sentiment and a more than 30% drop since December 2024.
Joanne Hsu, Director of the Surveys of Consumers, noted that the decline in sentiment was widespread, affecting consumers across various demographics including age, income, education, and political affiliation. Concerns about the ongoing trade war and its implications for the economy seem to be driving this downturn. Consumers reported deteriorating expectations regarding business conditions, personal finances, and the labor market.
The survey also revealed an increase in the proportion of consumers anticipating unemployment, which has risen for five consecutive months and is now at its highest level since 2009. This shift in labor market confidence contrasts sharply with the robust spending seen in previous years, which was largely supported by strong job growth and income stability.
Inflation expectations also surged, with consumers anticipating a year-ahead inflation rate of 6.7%, the highest since 1981. Long-term inflation expectations rose to 4.4% in April from 4.1% in March, indicating a growing concern about future price increases. This sentiment was echoed across different political affiliations, suggesting a broad-based apprehension about economic conditions.
The survey was conducted between March 25 and April 8, prior to President Trump's announcement regarding a partial pause in certain tariffs. These tariffs have been cited as contributing factors to the rising inflation expectations and increasing recession concerns among economic forecasters.