Last week, we got the latest read on consumer sentiment from the University of Michigan’s (U of M) Index of Consumer Sentiment (ICS), and it was not a pretty picture. According to the preliminary report for April, consumer sentiment dropped another 11% this month, extending a decline, U of M says, that began with the onset of the Iran war. This places the current reading about 9% below the reading for April 2025.
This is the lowest reading ever recorded in the history of this survey since 1946…
See more on plunging consumer sentiment in April
Economists and investors were buzzing about this latest reading on consumer sentiment. It was quite a shock to the system, coming in at a reading of 47.6, down 11% from the reading of 53.3 in March. This reading was also 9% lower than the reading of 52.2 from a year ago in April 2025.
The ‘Widespread Nature of This Month’s Fall’
In reporting the news, U of M commented at length on the surprising breadth of the decline.
“Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall,” the report noted.
Survey respondents mostly voiced dissatisfaction with rising prices (inflation) and deepening concerns over a spreading conflict in the Middle East. Both sub-components of the Index, including the Current Economic Conditions and the Index of Consumer Expectations, also fell in the double digits…another sign of the breadth of respondents’ reaction.
Consumers Feel the Pain Now, and Expect to Feel it Worse in the Future
Assessments of personal finances declined about 11%, with consumers expressing a substantial increase in concerns over high prices and weaker asset values. Buying conditions for durables and vehicles worsened, again on the basis of high prices. Open ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy.
Joanne Hsu, U of M Surveys of Consumers Director
CNBC noted that U of M’s survey came just after the Bureau of Labor Statistics reported that its all-inclusive reading of inflation jumped 0.9% in March, pushing the 12-month inflation reading up to 3.3%. While the Bureau said most of the increase in inflation came in elevated energy prices, this is a hot button for many consumers who endure the pain of filling their car’s gas tank…while emptying their wallets in the process.
Respondents Believe Inflation Will Continue to Rise
The sour mood of survey respondents led them to raise their estimate of inflation. In March, respondents said they expect year-ahead inflation to be around 3.8%. But in April, they raised that expectation by a full percentage point to 4.8%. This is the largest one-month increase in the inflation estimate since April 2025.
This current estimate of inflation by survey respondents exceeds that seen in 2024, the last year of President Biden’s term, and remains well above the 2.3% – 3.0% range seen in the two years leading up to the pandemic.
Trying to Finish on an Upbeat Note
Perhaps trying to finish on an upbeat note, Hsu said, “Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated.” No one knows when that will be.
Keep in mind, this is a preliminary result and subject to later adjustments. The finalized result will be released closer to the end of April. Generally, adjustments are minor, but we’ll get the final reading then.
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