Investing.com -- Friday’s consumer sentiment and inflation expectation report from the University of Michigan painted a gloomy picture for the U.S. economy – confidence is way down, while inflation expectations are way up. The report showed increased worries from all demographic and political affiliations as President Trump is set to launch retaliatory tariffs on April 2nd.
The university’s Index of Consumer Sentiment was reported at 57 for March, down 11.9% from February and down 28.2% from the same period last year. The March reading was below economists’ expectations of 57.9 and has now lost 30% since November 2024.
Meanwhile, inflation expectations over the next year jumped to 5% from 4.3%, the highest reading since November 2022. For the third consecutive month, the inflation expectations have seen unusually large increases of 0.5 percentage points or more.
The inflation expectation increase rose across all three political affiliations, the report stated.
In addition to year-ahead inflation expectations, longer-term inflation expectations also rose. Long-run inflation expectations surged from 3.5% in February to 4.1% in March.
Job security has also fallen, with two-thirds of consumers now expecting unemployment to rise.
“Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation,” Consumers Survey Director Joanne Hsu stated. “Consumers continue to worry about the potential for pain amid ongoing economic policy developments. Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009. This trend reveals a key vulnerability for consumers, given that strong labor markets and incomes have been the primary source of strength supporting consumer spending in recent years.”
U.S. stocks are down sharply today following the consumer sentiment report and the slightly hotter core PCE reading for February. At 11:45 AM ET, the Dow was down 1.2%, the S&P 500 was down 1.4%, and the Nasdaq was down 2%.