Consumer sentiment fell sharply in April, the fourth consecutive month of declines, as an intensifying trade war fueled anxiety over American jobs and rising inflation.
The University of Michigan’s closely watched consumer sentiment index, released Friday, fell 11% to 50.8, the lowest since the depths of the pandemic.
The decline was “pervasive and unanimous across age, income, education, geographic region, and political affiliation,” said Joanne Hsu, director of the survey.
The share of respondents expecting unemployment to rise in the coming months increased for the fifth straight month and is now the highest since 2009, during the Great Recession.
And Americans now expect long-term inflation to reach 4.4%, up from 4.1% last month, a move that may be of particular concern for the U.S. Federal Reserve. The Fed pays close attention to inflation expectations, because they can become self-fulfilling. If people expect prices to rise, they often take steps that can push up prices, such as accelerating purchases or seeking higher wages.
Those inflation expectations have now jumped for several months. At a news conference last month, Fed Chair Jerome Powell said the University of Michigan's inflation expectations measure was an “outlier.” Market-based measures of inflation expectations, based on inflation-adjusted Treasury securities, have remained low, near the Fed's 2% target.
Typically, falling sentiment suggests that Americans will cut back on spending, though in recent years consumers have at times kept spending despite the gloom. Yet the fact that worries about employment are rising could lead to more caution by consumers.
“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,” Hsu said.
