Consumer Sentiment Plummets to 57.9 in March, Worse Than Expected

The University of Michigan's latest survey has revealed a significant drop in consumer sentiment, falling to 57.9 in March 2025, marking the second consecutive month of decline. This downturn is more severe than anticipated, with all five components of the sentiment index deteriorating. The decline is driven by a 19% plunge in buying conditions for durables, largely due to fears of tariff-induced price increases. Economist Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, noted that consumers are bracing for a resurgence in inflation, which is reflected in the data showing a surge in year-ahead inflation expectations following recent tariff announcements.



The decline in consumer sentiment is not uniform across all groups. While sentiment fell for Democrats and Independents, it remained unchanged for Republicans, reflecting ongoing disagreements on the consequences of new economic policies. This disparity highlights the need for policymakers to address the differing views on economic policies to stabilize consumer sentiment.

The broader economic outlook is also weakening, with more than half of consumers expecting unemployment to rise in the year ahead. Views of personal finances have broadly deteriorated, with almost 40% of consumers blaming high prices for eroding their living standards. Although a majority of consumers expect their incomes to rise, only 16% expect their income gains to outpace inflation, indicating widespread worries over the trajectory of prices.

The long-term implications of this decline in consumer sentiment are potentially problematic. If consumers continue to expect higher inflation and economic uncertainty, it could lead to a self-reinforcing cycle of reduced spending and investment, further weakening the economy. Policymakers will need to take action to address these concerns and stabilize consumer sentiment. This could involve clear communication of economic policies, targeted support to affected groups, and economic stimulus measures to boost consumer spending.

In conclusion, the significant drop in consumer sentiment in March 2025 is a cause for concern, reflecting widespread fears of inflation and economic uncertainty. Policymakers must act swiftly to address these issues and restore consumer confidence, which is crucial for a sustainable economic recovery.