Consumer sentiment hits historic low as inflation fears hit 44-year high
Tariff uncertainty is sending inflation concerns to their highest point since the early ’80s.
American consumers are bracing for rising prices — and losing faith fast.
The University of Michigan’s consumer sentiment index dropped to 50.8 in April, the lowest reading since the 2022 postpandemic inflation — and the second-lowest on record since the survey began in 1952. Sentiment has plunged over 30% since December as “growing worries about trade war developments” risk tipping the economy toward recession, according to the release.
Rate expectations
At the heart of that anxiety? A sharp increase in cost expectations. Consumers now anticipate prices will climb 6.7% over the next year, the highest expected change since 1981, despite a cooling inflation print in March. The surge reflects worries that President Trump’s sweeping reciprocal tariff policies, which pushed US tariff rates to 100-year highs, could send prices soaring.
At the same time, labor market confidence is sliding, too. The share of consumers expecting unemployment to rise in the next year has more than doubled since November, to reach its highest level since 2009. That marks a break from the last few years, per the release, when strong jobs and income growth “primarily” supported robust spending.
So far, this pessimism hasn’t fully borne out in actual economic data like retail sales or payroll, as Fed Chair Jerome Powell observed last week. But cracks may start to show as stock market turmoil rattles high-income households that have quietly propped up the economy.
Indeed, signs of financial strain are already surfacing. More Americans are raiding their 401(k)s to cover emergency expenses, while credit stress is mounting. In Q4 2024, the share of credit card accounts making only minimum payments — and those more than 90 days past due — both reached record highs, per the Philadelphia Fed.
It’s still worth noting that the Michigan survey wrapped on April 8 — just one day before Trump’s 90-day tariff pause. Whether that move could help alleviate America’s sliding sentiments remains to be seen.
