From Anxious to Petrified': Consumer Sentiment Plunges Furth

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Dow Jones NewsApr 11, 5:57 PM UTC
DJ 'From Anxious to Petrified': Consumer Sentiment Plunges Further -- Update

By Harriet Torry

 

Americans turned much more pessimistic about the economy in April as President Trump's trade war gained steam, according to a closely watched survey of consumer sentiment.

 

The University of Michigan's consumer-sentiment index, released Friday, nosedived to 50.8 in April from 57 last month. Sentiment has been falling steadily throughout 2025. Expectations for inflation also hit the highest level in 44 years, according to the survey.

 

Sentiment is now at its second-lowest level in history, according to the survey. It was slightly lower in June 2022, when inflation was soaring thanks to snarled supply chains and pandemic buying. Back in 2022, the index touched 50, which was the lowest reading on record going back to 1952.

 

Sentiment declined for Democrats, Republicans and independents alike.

 

The survey took place over two weeks of back-and-forth tariff news, ending April 8. That makes it one of the first major economic gauges to capture the mood caused by Trump's expansive new tariffs. Trump announced his tariff plan on April 2. On April 9, he said he would pause certain tariffs on most countries -- though he hit China with additional levies.

 

Respondents also said they were bracing for prices to surge 6.7% in the year ahead -- a level of pessimism about costs last seen in the inflation-wracked early 1980s. That suggests Americans expect tariffs will push up prices fast; year-over-year consumer-price inflation in March was 2.4%, according to the Labor Department.

 

Some families, worried that higher prices would follow Trump's tariff announcement, rushed out over the weekend to stock up on everyday goods or accelerate big purchases like cars or phones.

 

"Consumers have spiraled from anxious to petrified," Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a note.

 

Sentiment for independents reached the lowest level on record. Sentiment for Republicans was the lowest it has been for almost any time during a Trump administration. (Republican sentiment was lower in late 2020, when Trump was still in office but after Joe Biden had won the election.)

 

Treasury yields, which have been rising in alarming fashion all week, climbed further after the data was released. That reflects concerns that rising inflation expectations could lead actual inflation to become entrenched in the economy.

 

Americans are also feeling less confident about the labor market, which has been a reliable bright spot with a more than three-year streak of unemployment around or below 4%. The share of consumers expecting unemployment to rise in the year ahead rose for the fifth consecutive month to the highest since 2009.

 

The survey results represent an ominous sign of potential 'stagflation' -- a mix of stagnating growth and rising prices. Rising inflation erodes consumer purchasing power, and weaker demand hurts companies' profits and causes layoffs.

 

Longer-run expectations, for inflation over a five-year horizon, increased to 4.4%. A year ago, they stood at 3%. The Federal Reserve targets 2% annual inflation.

 

Inflation expectations are important because economists think those expectations can be self-fulfilling. If consumers expect prices to rise, they may ask for pay increases. If businesses believe there are widespread expectations that prices are going up across the board, they may feel more inclined to raise their prices, too.

 

Consumers appear to be blaming Trump for his handling of the economy, said James Knightley, chief international economist at ING. He noted that 67% of respondents in the Michigan survey said the government is doing a poor job fighting inflation and unemployment, up from 44% in January.

 

Consumers are being hit on three fronts: by tariffs, a cooling jobs market and falling stock and bond markets, he said.

 

"So you've got income, prices and wealth all moving against the consumer, and that is not a pretty picture," he said.

 

Write to Harriet Torry at [e-mail]

(END) Dow Jones Newswires

 

April 11, 2025 13:57 ET (17:57 GMT)

 
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