According to the most recent University of Michigan Consumer Sentiment Survey, consumers are showing more economic and financial uncertainty. The final report showed the index dropping to 57 – its lowest since 2022. That’s a large drop from February’s 64.7 and an even bigger dip from last year’s 79.4. The numbers make it clear that consumers are feeling less optimistic when it comes to the economy.
Surveys of Consumers Director Joanne Hsu, breaks down a few aspects of the report, as she writes, “This month’s decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation. Consumers continue to worry about the potential for pain amid ongoing economic policy developments.”
The survey revealed that consumer sentiment dropped among all income groups, with high-income earners showing the most concern, as seen below:
Sentiment Among Consumers Decreased Citing Inflation as a Key Concern
Consumer sentiment is used as a key economic indicator that refers to how consumers are feeling about the economy, as well as their personal financial situation. It covers how optimistic or pessimistic consumers might feel about factors such as job stability, inflation, income potential, and future spending. As an example, the survey showed that two-thirds of consumers now expect that there will be a rise in unemployment over the coming year, and this marks a concern not seen since 2009.
These monthly results are closely watched as they can influence economic decisions such as spending and saving patterns, as well as investment activities. Taking these factors into account, the low consumer sentiment we’re currently seeing may very well end up resulting in slower economic activity.
Related Article: The Shockwave of Inflation: Credit Card Debt Out of Control Amid Surging Prices
Nancy Lazar, chief economist at Piper Sandler, comments on the situation, “As of now, I would call it an economy going at stall speed. The longer the uncertainty remains high, the higher the odds of things deteriorating.” Regarding the timeframe, things are not looking up, as this is the third straight month that consumer sentiment has lowered, dropping 12% from February. This particular timeframe falls in line with Trump’s Administration coming into play, which might be related to consumer uncertainty over new policies, massive federal layoffs, and tariffs that could push inflation up even higher.
Long-Run Inflation Expectations Rose
The survey showed that long-run inflation expectations climbed, increasing from 3.5% in February to 4.1% in March. This rise was pushed up by independent voters, as well as Republicans. On top of this, The Fed’s main inflation measure, which is the core personal consumption expenditures price index, revealed a 0.4% increase in February, setting the 12-month inflation rate at 2.8%, which is higher than anticipated. Along with this, year-ahead inflation expectations rose up from 4.3% last month to 5.0% in March.
Related Article: Fed Maintains Rate Freeze as Uncertainty Around Policy Changes Appears Unusually Elevated
Weak Consumer Confidence Poll Triggers Stock Market Dip
In response to the survey, major U.S. indexes ended the day on a bad note. The Dow dropped over 700 points, the S&P 500 fell close to 2%, and the Nasdaq dropped 2.7%.
The drop in consumer sentiment caused many investors to sell off stocks, but the sell-off was also pushed by Trump’s recent announcement of 25% tariffs on cars shipped into the United States, which will be in effect the first week of April. Additionally, starting this May, tariffs on parts such as engines and transmissions will also take effect. The Administration is moving full speed on its tariff policies, causing increased concerns regarding inflation. As Art Hogan, chief market strategist at B. Riley Wealth Management puts it, “It’s natural for people to expect higher prices because we haven’t seen a trade war like this since McKinley.”
A Poor Economic Outlook Doesn’t Have to Impact Your Financial Stability
Poor economic outlook and stock market volatility are good reasons for concern, especially when headlines point out that consumer sentiment is tanking, high inflation is predicted, and more tariffs are on the horizon. However, your financial situation doesn’t have to be impacted by all this economic and financial instability. You can protect yourself and shield your wealth from economic turbulence by investing in hard assets – tangible, physical items like real estate and precious metals.
Related Article: How Hard Assets Create Wealth and Financial Security
These tangible investments can act as a hedge against inflation and remain stable during economic downturns, which preserves your wealth even when traditional markets crash. If you’re interested in placing your funds into a safe asset such as a rental property that will not only provide monthly cash flow, but also grow in value, schedule a free 30-minute call with the team at Morris Invest.
We’re a full-service investment company that provides new construction rental real estate where every detail is taken care of for the investor, and this includes placing a tenant and a property manager for you.
Before you go, dive into the following video on how to secure your future in a turbulent economy:
