Consumer sentiment hits a record low as the Iran war sparks new inflation worries

Consumer sentiment has hit a rock bottom. April's University of Michigan survey released Friday put the headline sentiment index at 47.6, a reading that set a new all-time low and represented a 10.7% decline from the prior month, driven in large part by anxieties over the Iran war and its effect on prices.

Respondents put expected inflation over the next twelve months at 4.8%, up from 3.8% in March — a one-point swing that marked the steepest single-month move since April 2025. At the longer horizon, five-year inflation expectations climbed to 3.4%, adding 0.2 percentage points from the previous month and reaching their highest point since November 2025.

Every component of the index declined. The current economic conditions index fell 10.2% to 50.1, while the index of consumer expectations dropped 10.8% to 46.1. Sentiment fell across all age groups, income levels, and political affiliations, according to survey director Joanne Hsu.

"Demographic groups across age, income, and political party all posted setbacks in sentiment," Hsu said in a statement. Open-ended responses showed that many consumers attributed the deterioration directly to the Iran conflict.

One-year expected business conditions fell about 20% and now sits 6% below last April. Assessments of personal finances declined about 11%, with consumers citing concerns over high prices and weaker asset values.

Hsu noted that 98% of the interviews were completed before the April 7 announcement of a temporary cease-fire. Looking ahead, Hsu expressed measured optimism: "Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated."

On the same morning, the Bureau of Labor Statistics released its March price data, which showed a 0.9% monthly gain in the all-items CPI and put the year-over-year inflation rate at 3.3%. BLS officials attributed the bulk of that monthly jump to surging energy costs, with food prices little changed.

The March energy shock was severe: the gasoline index climbed 21.2%, its steepest monthly rise since the series began in 1967, while fuel oil jumped 30.7%. The energy index as a whole gained 10.9% for the month, its largest increase since September 2005. Gas prices at the pump had risen to a national average of near $4 per gallon as the conflict disrupted the Strait of Hormuz.

The April reading is the latest in a string of low sentiment readings tied to major economic disruptions during President Donald Trump's second term. The two previous lows came in April 2025, following Trump's "Liberation Day" tariff announcement, and in November 2025, during the longest government shutdown in U.S. history. Heather Long, chief economist at Navy Federal Credit Union, observed that three of the lowest consumer sentiment readings on record have occurred in the past nine months of Trump's second term.

Minutes from the Federal Reserve's March meeting showed policymakers divided over whether the Iran conflict's economic impact would ultimately require rate increases or cuts. The Fed left its benchmark rate unchanged at 3.5% to 3.75% at that meeting. Its next meeting is scheduled for April 28–29.