Trade Wars Sap Consumer Confidence

Consumer sentiment sank like a stone in recent weeks, according to preliminary results for April from the Surveys of Consumers at the University of Michigan. More specifically, the index fell for the fourth straight month, plunging 11% from March. This decline was, like the last month’s, pervasive and unanimous across age, income, education, geographic region and political affiliation.

“Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year,” said Surveys of Consumers Director Joanne Hsu. “ Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation and labor markets all continued to deteriorate this month.”

The share of consumers expecting unemployment to rise in the year ahead increased for the fifth consecutive month and is now more than double the November 2024 reading and the highest since 2009. This lack of labor market confidence lies in sharp contrast to the past several years, when robust spending was supported primarily by strong labor markets and incomes. (Note: interviews for this survey were conducted between March 25 and April 8, closing the day before President Trump’s partial reversal of most tariffs, excepting those on China, which he raised even further.)

Also up were year-ahead inflation expectations, which surged from 5.0% last month to 6.7% this month, the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more.

“This month’s rise was seen across all three political affiliations,” Hsu noted. “Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents.”

Click here for more from the survey.