University of Michigan survey shows sharp drop in March confidence
Consumer sentiment in the U.S. deteriorated more than expected in March, according to the University of Michigan’s latest Survey of Consumers released Friday. The index fell to 57.0, marking an 11.9% drop from February and a steep 28.2% decline year-over-year. This is the third consecutive monthly decrease and the lowest reading in over a year.
Economists had forecast a more moderate decline to 57.9. Instead, concerns about inflation and economic policy weighed heavily on households across political affiliations and income brackets, said survey director Joanne Hsu.
Expectations and inflation outlook worsen
The survey’s index of consumer expectations plummeted to 52.6, reflecting a 17.8% drop from February and a 32% fall compared to March 2024. Respondents now expect inflation to run at 5% over the next year and 4.1% over five years — the highest five-year outlook since 1993.
Hsu noted that “consumers continue to worry about the potential for pain amid ongoing economic policy developments,” referencing President Donald Trump’s recent tariff announcements as a key factor stoking inflation fears.
Economists warn that the inflationary impact of Trump’s tariff plans could hinder the Federal Reserve’s ability to proceed with further interest rate cuts.
Labor market anxiety grows
Survey participants also expressed mounting concern about the job market. The percentage of respondents expecting the unemployment rate to rise is now at its highest since 2009, another sign of deteriorating economic confidence.
The survey’s release coincided with Commerce Department data showing that core inflation rose to 2.8% in February, following a 0.4% monthly gain—the sharpest increase since January 2024.
Market reaction
U.S. stocks reacted negatively to the grim data. The Dow Jones Industrial Average dropped more than 500 points after the survey results were made public, as investors digested the implications of growing economic anxiety and potentially persistent inflation.
