Consumer sentiment in the United States has significantly dipped, marking an 11% decline this month to a preliminary reading of 50.8, according to the latest survey from the University of Michigan released on Friday. This figure represents the second-lowest reading since records began in 1952, with April’s numbers falling below anything witnessed during the Great Recession.
The decline in consumer sentiment is largely attributed to President Donald Trump’s volatile trade war, which has raised concerns about higher inflation and negatively impacted Americans’ psychological state over the past few months. This sour mood appears to have deepened leading up to Trump’s announcement last week regarding sweeping tariffs.
Joanne Hsu, the director of the Michigan survey, noted that the decline in consumer sentiment was widespread across all demographics, including age, income, education, geographic region, and political affiliation. Hsu stated in a release, “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.”
The Federal Reserve and Wall Street are monitoring how this declining sentiment may affect consumer spending, which constitutes approximately 70% of the US economy, and whether Americans will lose faith in the idea that inflation will return to normal in the near future. Trump recently paused his massive tariff hike on numerous countries for 90 days but retained a 10% baseline duty on all imports and separate tariffs on specific products and commodities. However, China remained unaffected by this delay, intensifying a contentious trade standoff between the two largest economies, with Beijing raising its retaliatory tariffs on US imports from 84% to 125%.
The Michigan survey conducted between March 25 and April 8 does not reflect the recent reaction to the announced tariff delay.
In the realm of economics, surveys are often categorized as “soft data,” while actual economic activity measures like retail sales are termed “hard data.” There’s a clear deterioration in soft data attributed to Trump’s tariffs; for instance, the latest Michigan survey indicated that “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.”
Despite this gloomy outlook, hard data remains relatively robust. Employers continue to hire at a strong pace, and retail spending has not dramatically curtailed yet, though recent reports show retail sales have been weaker than expected. Fed Chair Jerome Powell remarked last week, “Sometimes the surveys are very negative, but they keep spending. People spent right through the pandemic and they spent right through this time of higher inflation.”
However, economic conditions could be set for a downturn. New York Fed President John Williams indicated at an event in Puerto Rico that he anticipates a sharp slowdown in economic growth this year, potentially leading to increased unemployment and heightened inflation. Williams stated, “Given the combination of the slowdown in labor force growth due to reduced immigration and the combined effects of uncertainty and tariffs, I now expect real GDP growth will slow considerably from last year’s pace, likely to somewhat below 1%.”
Spending among affluent Americans has been crucial for sustaining the US economy in recent years, but the recent stock market volatility, triggered by Trump’s tariffs, threatens this stability. Bill Adams, chief economist at Comerica Bank, pointed out in a recent analyst note that “wealthy consumers’ stock market gains kept the economy growing in 2024 despite high prices, but the wealthy won’t feel confident enough to keep spending if this keeps up.”
Larry Fink, CEO of BlackRock, the world’s largest asset manager, commented on Friday that the current climate of uncertainty, stemming from Trump’s tariffs, resembles the atmosphere of the 2008 global financial crisis. “We’ve seen periods like this before when there were large, structural shifts in policy and markets—like the financial crisis, Covid-19 and surging inflation in 2022. We always stayed connected with clients, and some of BlackRock’s biggest leaps in growth followed,” Fink noted.
Echoing similar sentiments, JPMorgan Chase CEO Jamie Dimon remarked on Friday following the bank’s latest quarterly earnings release that “the economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars.’”
One survey-based measure that is incredibly significant for the Federal Reserve is Americans’ perceptions of prices. This measure is critical because it can become self-fulfilling; if people expect inflation to persist, they may alter their spending habits accordingly. Currently, expectations for inflation rates one year ahead surged to 6.7% this month from 5% in March, marking the highest level since 1981, while expectations for the next five to 10 years rose to 4.4% from 4.1%.
If Americans lose confidence that inflation will return to normal, this could complicate the Federal Reserve’s efforts to implement effective monetary policies. Dallas Fed President Lorie Logan emphasized on Thursday at an event in Dallas that “history teaches that when higher inflation expectations become entrenched, the road back to price stability is longer, the labor market is weaker and the economic scars are deeper.”
With inflation expectations more vulnerable to becoming “un-anchored” due to Americans’ recent experiences with high inflation, consumer sensitivity to elevated prices is notably heightened.
image source from：https://www.cnn.com/2025/04/11/economy/us-consumer-sentiment-april/index.html
