US consumer sentiment hit near-record lows and long - term inflation expectations reached a 34-year high due to concerns over domestic impacts of tariffs. - Bloomberg

US consumer sentiment hit near-record lows and long - term inflation expectations reached a 34-year high due to concerns over domestic impacts of tariffs. - Bloomberg

US consumer sentiment hit near-record lows in April, according to the University of Michigan’s latest survey, with long-term inflation expectations reaching a 34-year high. The final April sentiment index fell to 52.2, down from 57 in March [1]. This marks the fourth-lowest reading in data going back to the late 1970s.

Consumers anticipate inflation to rise at an annual rate of 4.4% over the next five to 10 years, with expectations for prices to rise at a 6.5% pace over the next year [1]. These figures represent the highest since 1981 and 1991, respectively.

The survey, conducted from March 25 to April 21, coincided with President Donald Trump’s announcement of a 90-day pause on higher tariffs for dozens of US trading partners and the subsequent increase in duties on Chinese goods to 145% [1]. These trade policies have fueled concerns about higher inflation and economic uncertainty, contributing to the decline in consumer sentiment.

The University of Michigan’s expectations index slumped to 47.3, the lowest since 2022, with 60% of respondents mentioning tariffs as a source of concern [1]. The decline in consumer expectations was broad across demographic, income, and political groups. Additionally, expectations for the economy, incomes, the stock market, and homebuying conditions worsened from a month earlier [1].

Corporate leaders are warning of financial pain for consumers as companies pass along higher tariffs and commodities costs. Procter & Gamble Co, for instance, estimated that the current and proposed tariffs could add between US$1 billion and US$1.5 billion to its annual costs [1]. The company plans to counter this by raising prices on its products.

Expectations decreased across political lines, with Democrats and political independents seeing their worst readings, and Republicans dropping to a five-month low [1]. The current conditions gauge declined to 59.8, improving from the preliminary reading of 56.5 due to the pause in tariffs [1].

Market reactions were mixed, with U.S. equity markets coming off a three-day rally, but escalating trade tensions and increasing uncertainty between the US and China have capped momentum [3]. The University of Michigan’s consumer sentiment index for April is due after the opening bell, with economists expecting no change from March’s reading of 50.8 [3].

The European Central Bank’s task of restoring 2% inflation is almost complete, with April’s reading set to come in only a fraction north of that target [2]. However, the euro-zone may face a noticeable impact from US tariffs in the coming months, with GDP growth forecasts reduced to almost zero for the second and third quarters [2].

References:
[1] https://theedgemalaysia.com/node/753063
[2] https://www.bloomberg.com/news/newsletters/2025-04-25/us-consumer-sentiment-plummets-on-trump-trade-war
[3] https://newsable.asianetnews.com/markets/dow-futures-indicate-3-day-rally-may-come-to-a-halt-with-april-consumer-sentiment-data-in-view-trump-tariffs-unresolved/articleshow-l77sk49