The University of Michigan’s Consumer Sentiment Index plunged to 50.8 in April, an 11% drop from March and the second-lowest reading in its history, dating back to 1952. This sharp decline reflects growing unease over rising inflation and escalating trade tensions, marking a significant deterioration in consumer confidence not seen since the Great Recession.
According to Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, the decline was “pervasive and unanimous across age, income, education, geographic region, and political affiliation.” The index has now fallen more than 30% since December 2024 as concerns over trade policies and inflationary pressures continue to weigh on sentiment.
The survey also revealed that expectations for business conditions, personal finances, incomes, inflation, and labor markets all worsened in April. Notably, the share of consumers anticipating higher unemployment in the coming year has doubled since November 2024 and is now at its highest level since 2009.
One-year inflation expectations surged to 6.7%, the highest level since 1981, up from 5.0% in March. Long-term inflation expectations also rose to 4.4%, compared to 4.1% last month. These figures underscore growing fears that the U.S. economy may be entering a period of stagflation, characterized by high inflation and stagnant growth.
The ongoing trade conflict between the United States and China has been a significant driver of declining consumer confidence. Last week, President Trump increased tariffs on Chinese goods to 125%, prompting Beijing to impose similar retaliatory measures. While some tariffs were partially reversed on April 9, many remain in place, including a broad 10% tariff on nearly all imports and a 25% tariff on automobiles, steel, and aluminum.
These developments have heightened concerns about their potential impact on economic growth and job security. “Tariffs and the drop in equity prices are not sitting well with consumers,” noted Ryan Sweet, chief U.S. economist at Oxford Economics.
The steep decline in consumer sentiment raises red flags for the broader economy. Historically, consumer spending has been a key driver of economic growth in the U.S., supported by strong labor markets and rising incomes. However, with confidence eroding and inflation expectations climbing, economists warn of an increased risk of recession.
Harry Chambers, assistant economist at Capital Economics, emphasized that “tariff-related fears which had soured sentiment over the past couple of months are here to stay.” The Federal Reserve may also face mounting pressure to address inflationary concerns without stifling economic growth.
The data for this report was collected between March 25 and April 8, prior to some recent trade policy adjustments. Final data for April will be released on April 25. In the meantime, policymakers will likely scrutinize these findings as they navigate an increasingly complex economic landscape.
As inflation fears grow and trade tensions persist, consumer sentiment remains a critical barometer for understanding the challenges facing the U.S. economy in 2025.
