US consumer sentiment deteriorated sharply in April and 12-month inflation expectations surged to the highest level since 1981 amid unease over escalating trade tensions that have roiled financial markets and raised the risk of a recession.
The University of Michigan Surveys of Consumers said yesterday that the slump in sentiment to the lowest level in nearly three years was “pervasive and unanimous” across age, income, education, geographic region and political party affiliation.
The jump in inflation expectations poses a dilemma for Federal Reserve officials, who have argued they remain anchored. President Donald Trump this week ratcheted up trade tensions, hiking duties on Chinese goods to 125 per cent, even as he delayed reciprocal tariffs on other trade partners for 90 days.
Beijing yesterday retaliated with a 125pc tariff of its own. Trump has maintained a 10pc blanket duty on almost all US imports as well as a 25pc tariff on motor vehicles, steel and aluminium, leaving businesses and consumers bracing for a burst in inflation.
“Consumers have spiralled from anxious to petrified,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics.
The Consumer Sentiment Index dropped to 50.8 this month, the lowest reading since June 2022, from a final reading of 57.0 in March. Economists polled by Reuters had forecast the index falling to 54.5.
The decline in sentiment was more pronounced among Democrats and Independents. Morale was also down among Republicans.
The survey was concluded on April 8, before Trump’s latest moves on import duties. Apart from causing apprehension about inflation, the White House’s tariffs campaign has wiped out billions of dollars from retirement accounts and heightened uncertainty for businesses, which could hurt the labour market.
The survey showed the share of consumers expecting unemployment to rise in the year ahead increased for the fifth straight month to the highest level since 2009, when the economy was in the midst of the Great Recession.
“This lack of labour market confidence lies in sharp contrast to the past several years, when robust spending was supported primarily by strong labour markets and incomes,” said Surveys of Consumers Director Joanne Hsu.
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