Consumer sentiment plunges in early March, inflation expectations soar
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Consumers are becoming sharply more pessimistic about the economic outlook, according to a preliminary reading of the University of Michigan's sentiment survey for March.
Why it matters: The mix of new tariffs, federal cutbacks, erratic policy, and a slumping stock market is dampening American's optimism, which risks generating self-fulfilling economic weakness in the event consumers act on their newfound sense of worry.
- Lower sentiment was strikingly broad-based, seen "across all groups by age, education, income, wealth, political affiliations, and geographic regions," survey director Joanne Hsu said in an announcement.
By the numbers: Overall consumer sentiment fell by about 11% in the month to 57.9, the third straight month of decline. That level is the lowest since the fall of 2022, when Biden-era inflation was still running high.
- The decline was sharpest among Democrats, whose expectations declined 24%, but sentiment among Republicans fell 10% as well.
- Inflation expectations also surged, with survey respondents now expecting inflation over the next year of 4.9%, up from 4.3% a month ago
Of note: Long-term inflation expectations also surged, to 3.9% in March from 3.5% in February. That will be particularly worrying to Federal Reserve officials, who may be reluctant to respond to any weakening in the economy due to fears that inflation expectations are coming unmoored.
- That was the largest one-month rise in long-term inflation expectations since 1993.
What they're saying: "While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy," Hsu wrote, "including personal finances, labor markets, inflation, business conditions, and stock markets."
- "Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one's policy preferences," she added.
Yes, but: The preliminary reading of the Michigan survey, released mid-month, is based on a relatively small sample of around 420 households.
- The final March number, based on about 800 survey respondents, is to be released March 28.
