WASHINGTON (AP) — Concerns over jobs and inflation, spurred by an escalating trade war, have caused a significant drop in consumer sentiment for April, marking the fourth straight month of decline.
The University of Michigan's widely followed consumer sentiment index, published Friday, revealed an 11% decrease to 50.8, a level not seen since the peak of the pandemic.
Joanne Hsu, the survey's director, noted that the downturn was "widespread and consistent across various demographics, including age, income, education, region, and political affiliation."
The proportion of individuals anticipating an increase in unemployment in the near future has risen for the fifth consecutive month, reaching its highest point since the Great Recession in 2009.
Furthermore, Americans now anticipate long-term inflation to hit 4.4%, up from 4.1% the previous month. This development could be particularly worrisome for the U.S. Federal Reserve, which closely monitors inflation expectations due to their potential to become self-fulfilling. Expectations of rising prices can lead to behaviors that further drive up prices, such as increased purchasing or demands for higher wages.
These inflation expectations have been climbing for several months. During a recent press conference, Federal Reserve Chair Jerome Powell described the University of Michigan’s inflation expectations as an "outlier." Market-based indicators of inflation expectations, derived from inflation-adjusted Treasury securities, have remained subdued, hovering around the Fed’s 2% target.
Historically, declining sentiment suggests a reduction in consumer spending. However, recent years have seen consumers continue spending despite pessimistic outlooks. The growing concerns about employment, though, may prompt increased caution among consumers.
Hsu emphasized that "this absence of confidence in the labor market sharply contrasts with the preceding years, when strong labor markets and incomes primarily supported robust spending."