US consumer sentiment dropped to its lowest level on record in early April, reflecting growing concerns over inflation and economic uncertainty, according to a widely watched survey released on Friday.
The University of Michigan’s Surveys of Consumers reported that its Consumer Sentiment Index fell sharply to 47.6 this month, compared to a final reading of 53.3 in March.
The decline significantly undershot economists’ expectations, as those polled by Reuters had forecast a more moderate decrease to 52.0.
Broad- based decline across demographics
The downturn in sentiment was not limited to any specific group.
According to the survey, the deterioration was observed across age groups, income levels, and political affiliations, indicating widespread unease among consumers.
However, the report noted that nearly all responses were collected before a ceasefire agreement earlier in the week in the US-Israeli war with Iran.
This suggests that geopolitical developments may have continued to influence sentiment during the survey period.
Iran conflict weighs on consumer outlook
The ongoing conflict has had a tangible impact on economic perceptions, particularly through rising energy costs.
Oil prices have surged by more than 30% amid the tensions, pushing the national average retail gasoline price above $4 per gallon for the first time in over three years.
Joanne Hsu, director of the Surveys of Consumers, highlighted the role of geopolitical uncertainty in shaping public sentiment.
She stated, “Open-ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy.”
This surge in energy prices appears to have contributed significantly to the pessimistic outlook among households.
Inflation expectations climb sharply
Alongside declining sentiment, consumers are also bracing for higher inflation in the near term.
The survey’s measure of inflation expectations for the next 12 months rose to 4.8% in April, up from 3.8% in March.
Longer-term expectations also edged higher.
Consumers now anticipate inflation to average 3.4% over the next five years, compared to 3.2% in the previous month.
The rise in both short-term and long-term inflation expectations underscores growing concerns about persistent price pressures, particularly as external factors such as geopolitical conflicts continue to disrupt global markets.
Outlook remains uncertain
Despite the ceasefire agreement offering a potential pause in geopolitical tensions, the survey indicates that consumer concerns remain deeply entrenched.
The sharp rise in inflation expectations suggests that households are preparing for sustained pressure on purchasing power, particularly as essential costs such as fuel continue to climb.
This cautious sentiment could have broader implications for consumer spending patterns in the coming months.
As individuals may prioritise savings and cut back on discretionary expenses amid ongoing economic uncertainty.
This post US consumer outlook deteriorates sharply amid Iran war tensions may be modified as updates unfold
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