Consumer sentiment worsens as inflation fears grow, University of Michigan survey shows

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Consumer Sentiment Plummets in March Amid Rising Inflation Concerns

The latest University of Michigan survey revealed a significant deterioration in consumer sentiment in March, surpassing economists’ expectations. The Survey of Consumers final reading for the month came in at 57.0, marking an 11.9% drop from February and a staggering 28.2% decline from the same period last year.

According to survey director Joanne Hsu, the decline in consumer sentiment was broad-based, affecting individuals across party lines and income groups. Hsu attributed the ongoing economic policy developments as a key driver of consumer worries.

One of the major factors contributing to the decline in sentiment was inflation concerns. Respondents in the survey anticipate a 5% inflation rate one year from now, marking a 0.1 percentage point increase from the mid-month reading and a 0.7 percentage point jump from February. Looking ahead to the five-year horizon, the outlook for inflation now stands at 4.1%, the highest reading since February 1993.

Economists are particularly concerned that President Donald Trump’s tariff plans could further exacerbate inflationary pressures, potentially limiting the Federal Reserve’s ability to implement additional interest rate cuts. The Commerce Department’s report indicating a core inflation rate of 2.8% in February, coupled with a significant monthly gain, only added to these worries.

In addition to inflation fears, the survey also highlighted concerns about the labor market, with a growing number of consumers expecting the unemployment rate to rise. This sentiment was further reflected in the stock market, with the Dow Jones Industrial Average experiencing a significant drop of over 500 points following the release of the survey results.

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In conclusion, the University of Michigan survey underscores the deepening concerns among consumers regarding inflation and the overall economic outlook. As policymakers and market participants grapple with these challenges, staying informed and seeking expert guidance will be crucial in navigating the evolving financial landscape.