Consumer sentiment plunges in April, inflation expectations at 1980s high
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U.S. consumer confidence plunged for the fourth consecutive month in early April, the University of Michigan said on Friday.
Why it matters: President Trump's tariff policies crushed the economic optimism that prevailed after the presidential election. Now consumers — including Republicans — fear inflation will skyrocket and the economy will weaken, expectations that economists say could be self-fulfilling.
What they're saying: "Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month," the University of Michigan said in a release.
- Sentiment is down 30% from December "amid growing worries about trade war developments that have oscillated over the course of the year," the economists add.
Between the lines: The University of Michigan's long-running survey is the closest thing to a real-time indicator of how Americans are responding to trade policy.
- But there is an important caveat: The survey, which is preliminary, ended before Trump announced there would be a 90-day freeze on reciprocal tariffs earlier this week.
- It might not capture potential relief from the administration's recent announcements of trade negotiations with a slew of nations.
By the numbers: Consumer sentiment plunged 11% from March, with "pervasive and unanimous" declines across political parties, age, income, education and geographic region, according to the release.
- Inflation expectations in the year ahead surged to 6.7% from 5% this month, the highest reading since 1981. All political parties reported higher inflation expectations, the University of Michigan said.
Reality check: Recession and inflation fears are running wild across financial markets and among CEOs and consumers. That message is in sharp contrast with the official economic indicators that typically set the tone on Wall Street.
- The Consumer Price Index, released earlier this week, showed overall prices fell in March, thanks to plunging gasoline prices — data that captures the period before tariffs ramped up. A gauge that strips out energy and food prices was similarly benign last month.
- Weekly unemployment filings remain low and the economy added a healthy 228,000 jobs in March.
