US consumer sentiment has reached its lowest level in three years, with households bracing for a potential surge in inflation due to tariffs. The University of Michigan’s Surveys of Consumers reported a decline in morale among Republicans, suggesting that even President Trump’s base is concerned about the economic impact of his trade policy.
The survey showed a significant drop in overall sentiment, with 12-month inflation expectations soaring to 7.3%, the highest level since November 1981. This jump pointed to higher prices in the months ahead, despite benign consumer prices in April. Economists expect inflation to pick up by mid-year and are warning that it could complicate matters for the Federal Reserve.
The decline in sentiment also hit single-family housing starts, which dropped 2.1% in April to a nine-month low of 927,000 units. This suggests the weakness might persist, with builders reporting “difficulties pricing their homes recently due to uncertainty around material prices.” The National Association of Home Builders survey showed sentiment among single-family homebuilders plummeted to a 1-1/2-year low in May.
The concerns over inflation and tariffs have led some experts to warn that the economy might be entering a period of recession. However, Fed Chair Jerome Powell warned on Thursday that “we may be entering a period of more frequent, and potentially more persistent, supply shocks.”
Source: https://www.reuters.com/business/us-single-family-housing-starts-building-permits-fell-april-2025-05-16