Consumer sentiment fell sharply in April, marking the fourth consecutive month of declines as concerns about the trade war, rising inflation, and job security intensify. The University of Michigan’s consumer sentiment index dropped by 11% to 50.8, the lowest level since the pandemic began. Expectations for rising unemployment and inflation are at alarming levels, with Americans now foreseeing long-term inflation reaching 4.4%, the highest since 1991.
Both Democrats and Republicans experienced significant drops in consumer sentiment, indicating widespread apprehension across all demographics. Inflation expectations have been steadily increasing, with concerns that the tariffs imposed by the trade war could have lasting damaging effects on the economy.
Federal Reserve Chair Jerome Powell has noted the outlier nature of the University of Michigan’s inflation expectations measure, as market-based measures remain low. Despite historically low consumer sentiment, past trends have shown that Americans may continue spending, although concerns about employment could lead to more cautious consumer behavior.
The persistent decline in consumer sentiment reflects a lack of confidence in the labor market, which has been a driving force behind consumer spending in recent years. These economic indicators suggest a challenging environment for American households, as they navigate uncertainties surrounding job security and increasing inflation rates.
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