This morning, the University of Michigan’s consumer sentiment survey indicated an unprecedented decline in consumer confidence for the month of April. March’s mid-month Composite PMI dropped sharply to 50.8. This figure indicates an alarming decline from March’s reading of 57.0. It’s below the Dow Jones consensus estimate of 54.6. The significant 10.9% monthly change speaks to a disturbing direction. Consumer sentiment is down an almost unbelievable 34.2% from last year.
Alarmingly, the survey shows a sharp increase in concerns over the economy in general – namely worries over unemployment – which are at their highest point since 2009. Almost all respondents cited growing concerns surrounding inflation. In short, they’re forecasting inflation to peak at 6.7% a year from now — if that’s right, it would be the highest level since November of 1981. This expectation is a 27 percentage point jump from the 5% that said so back in March.
At the five-year horizon, inflation expectations did increase, ticking up to 4.4%, a 0.3 percentage point increase since last month. That’s the most elevated inflation expectation for this length of time since June 1991. The highly watched current economic conditions index fell to 56.5, an 11.4% decrease since March. At the same time, the future expectations measure fell to 47.2, a 10.3% decline, and reached its lowest level since May of 1980.
Economic analysts view these trends with concern. Hsu, an expert in consumer behavior, noted that “Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month.” This quote highlights the multi-faceted complexity of the economic challenges consumers currently face.
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, emphasized the severity of consumers’ outlook on the economy, stating, “Consumers have spiraled from anxious to petrified.” His comments are symptomatic of a growing mood that, for many, the economy just doesn’t work.
The University of Michigan’s consumer sentiment survey has some bad news. This comes at a time when consumer confidence is tumbling due to continued high inflation and increased fears over job security. As Americans continue to face these burdens, the potential impact on consumer spending—one of the most important pillars of sustained economic growth—could be severe.