Consumers are in a foul, foul mood
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The first evidence of how Americans view the economy in April is in: People hate it.
The big picture: Americans are remarkably down on the state of the economy, even though headline measures of conditions like unemployment and inflation are not that bad.
Driving the news: The University of Michigan consumer sentiment survey's preliminary reading for April fell 11%, to 47.6.
- If those numbers are maintained when the full data comes out at the end of the month, it would be the lowest on record, below the previous-low reading of 50 at the peak of Biden-era inflation.
- There were steep drops in indexes assessing both current conditions and expectations for the future.
- Consumers' expectations for inflation over the next year surged to 4.8%, from 3.8% in March. Longer-run inflation expectations — of particular concern to the Federal Reserve — ticked up as well, to 3.4% from 3.2%.
Of note: The setback in sentiment was widely dispersed, among survey respondents of all ages, income brackets and political affiliations.
- Since February, before the war, sentiment has fallen 10 points among both Democrats (to 31.8) and Republicans (to 87.1).
Between the lines: It is stunning to see consumer sentiment so deeply in the toilet at a time of relatively low unemployment, inflation that is still far below recent highs and a stock market that's holding up reasonably well.
- Extreme public disapproval of the economy — which has been evident in survey data for years now — is looking less like an outgrowth of specific economic developments and more like a generalized fact about how Americans are feeling.
Yes, but: Michigan reports that 98% of survey interviews were conducted before the announcement of a ceasefire in the Iran war on Tuesday.
- "Open-ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy," writes survey director Joanne Hsu.
- "Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated," she adds.
