Consumer sentiment sank in April as inflation fears hit a 44-year high and recession signals spread across key indicators.
Optimism among U.S. consumers declined further in April, according to the latest University of Michigan sentiment survey, which showed inflation fears rising to their highest level in more than four decades.
The University of Michigan’s preliminary April
reading on consumer sentiment came in at 50.8—missing expectations and marking a steep decline from 57.0 in March. The drop put sentiment around 30 percent below December 2024 levels, bringing the index to its weakest point
since June 2022 and the second lowest in more than 70 years of tracking.
Declines in consumer sentiment were broad-based, affecting all age, income, and political groups, according to survey 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,” Hsu said in a statement.
Expectations for rising unemployment climbed for the fifth consecutive month, more than doubling since November 2024 and reaching their highest level since 2009—reflecting growing anxiety about the labor market outlook.
Inflation expectations, meanwhile, surged. The year-ahead inflation outlook jumped to 6.7 percent in April, up from 5 percent in March and marking the highest reading since 1981. It was the fourth consecutive month of unusually large increases—each exceeding half a percentage point—with concern cutting across party lines.
Long-run inflation expectations also edged higher, rising to 4.4 percent from 4.1 percent a month earlier. While inflation fears increased among all groups, the survey noted a particularly steep rise among political independents, suggesting growing unease about the economy’s long-term direction.
These expectations stand in stark contrast to actual inflation data, which in March showed signs of easing. The annual inflation rate
dipped to 2.4 percent—its lowest level in six months—helped by declining energy prices. The consumer price index posted a 0.1 percent month-over-month decline. However, core inflation remained elevated at 2.8 percent, and Federal Reserve officials
have warned that progress may stall.
Federal Reserve Chair Jerome Powell
recently cautioned that tariffs are “highly likely” to cause “at least a temporary rise in inflation,” underscoring the risk that trade policy could undermine efforts to keep inflation in check.
At the producer level, wholesale inflation also showed signs of cooling. The producer price index (PPI)
fell 0.4 percent in March—its first monthly drop since October 2023—bringing the annual rate down to 2.7 percent from 3.2 percent in February, according to the Bureau of Labor Statistics. The PPI is a forward-looking metric because shifts in producer prices tend to eventually get passed along to consumers.
Consumer confidence had surged after the November election, fueled by expectations that the Trump administration’s pro-growth agenda would boost the economy. In recent months, however, sentiment has deteriorated while inflation concerns have mounted—largely driven by uncertainty surrounding tariffs.
“Consumer are facing problems on three key fronts: 1) tariffs will put up prices and squeeze spending power, 2) government spending cuts are raising concerns about jobs and entitlements, and 3) falling stock and bond markets are eroding household wealth,” analysts at ING
wrote in a research note. “So that means prices, incomes, and wealth are all moving against the household sector, and it is understandable why they are feeling anxious.”
The University of Michigan sentiment survey was conducted between March 25 and April 8—just before President Donald Trump
announced a 90-day pause on new reciprocal tariffs. That move, unveiled on April 9, temporarily calmed markets and fueled a sharp rally in equities.
Under the revised plan, while Trump froze reciprocal tariffs on U.S. allies for three months, he raised duties on Chinese goods to 145 percent. China retaliated by announcing a 125 percent tariff on American imports. Meanwhile, a 10 percent blanket tariff on nearly all U.S. imports remains in place, along with a 25 percent levy on vehicles, steel, and aluminum.
“There is no country who has abused and ripped off America more than China,” White House press secretary Karoline Leavitt
said in a post on social media platform X. “President Trump is stopping it and putting America First. The era of economic surrender is over.”
The back-and-forth over tariffs capped one of the most volatile stretches for markets in recent memory. While stocks rallied on the tariff pause, the yield on the 10-year Treasury surged more than 40 basis points during the week—marking the sharpest weekly increase since the early 2000s.
