US consumer sentiment has taken a sharp turn for the worse, with expectations about the future economy slumping nearly 18% in March. The University of Michigan’s consumer sentiment index fell to 57, while the expectations index tumbled to 52.6 – a one-month decline of 17.8%. This is the highest level since November 2022.
Demographically, all groups are expressing worsening expectations for their personal finances and business conditions. A significant majority, two-thirds, expect unemployment to rise in the year ahead, with many citing ongoing economic policy developments as a major concern.
The recent announcement of import tariffs by President Trump has added fuel to the fire. With 25% tariffs set to be imposed on vehicles not made in the US, economists fear this will increase inflation and further dampen consumer confidence.
While incomes and spending have remained relatively stable, the lack of clarity on future economic policies is creating uncertainty. “When you don’t know what’s coming, it’s harder to plan,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. This is leading consumers to make tough decisions, such as accelerating purchases out of fear or pulling back on spending altogether.
The combination of a slowing economy and sticky inflation could lead to “stagflation,” a condition that would leave the Fed in a quandary when it comes to interest rates. With markets pricing in one or two cuts this year, experts are watching with bated breath to see how Trump’s economic policies will play out. Will the administration back off some of its proposals, or will the souring mood of Americans cause further carnage in the stock market? Only time will tell.
Source: https://www.usnews.com/news/economy/articles/2025-03-28/consumers-turn-even-more-sour-inflation-expectations-surge