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Consumer sentiment is now lower than during the 2008 financial crisis, reflecting worries that President Donald Trump’s tariff policies will create new inflationary pressures.
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Details from the University of Michigan’s consumer sentiment survey show that consumers expect wages to fall short of price increases and predict business conditions will worsen.
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Economists worry that poor consumer sentiment will result in lower spending levels, potentially weakening a key driver of the U.S. economy.
Tariffs and the uncertainty surrounding them have tanked consumers’ feelings about the economy’s future.
In preliminary April readings, the Michigan Consumer Sentiment Index fell to its lowest point since June 2022, when the public grappled with the impact of surging inflation following pandemic lockdowns. That’s also lower than at any point during the 2008 financial crisis, when a meltdown in mortgage markets led to bank failures and a crisis in the global financial system.
Survey responses show that President Donald Trump’s tariff policies have caused economic jitters. Trump says the tariffs are needed to rebalance trade, bring back manufacturing jobs and raise more money for the federal government. Economists warn that tariffs could increase prices for inflation-weary shoppers.
Weaker consumer confidence in the economy’s future is a concern for forecasters because it can be a precursor to slower spending. Consumer spending accounts for a large chunk of gross domestic product (GDP), a measure of the economy’s growth, and shopping has helped to buoy the economy through spiking inflation in the wake of COVID-19’s economic aftermath.
“The bottom line is that consumer sentiment is very weak, and the fear is that this will spill over to weaker actual spending,” wrote Torsten Sløk, Apollo chief economist, in a blog post.
Diving deeper into recent results from the University of Michigan survey revealed other indications that consumers are experiencing a crisis of confidence tied to tariffs.
A historically high portion of consumers expect to lose purchasing power in the upcoming year. More than three out of every five survey respondents expect prices to rise faster than wages.
In another snapshot of fading sentiment, 51% of respondents to the Michigan survey said they expect business conditions to worsen over the next year, the most negative response the survey has had at any point in its history.
More information on consumer sentiment will be available Friday when the final numbers for April are released.
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