U.S. consumer sentiment dips in March as inflation expectations rise, survey shows

Investing.com - U.S. consumer sentiment deteriorated by more than expected in March, while year-ahead expectations for inflation jumped to their highest level since November 2022, in a sign that households are becoming increasingly wary of the possible impact of President Donald Trump’s tariff plans.

The University of Michigan’s Surveys of Consumers on Friday said its consumer sentiment index fell to 57.9 this month, down from 64.7 in February, a preliminary reading showed. Economists had seen the figure at 63.1.

While current economic conditions were little changed, expectations for the future slumped across several facets of the U.S. economy, including personal finances and stocks markets, the survey found.

"Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences," said Joanne Hsu, Director of the Surveys of Consumers at the University of Michigan.

One-year inflation expectations, meanwhile, increased to 4.9% from 4.3%, marking three consecutive months of what the survey described as "unusually large" upticks of 0.5 percentage points or more. Long-run expectations for price gains also surged to 3.9%, up from a previous level of 3.5% -- the largest month-on-month increase seen since 1993.

Trump has threatened to threatened slapping tariffs on both allies and adversaries alike, saying the moves are necessary to achieve everything from stemming illegal drug flows into the U.S. to bolstering the domestic labor market.

Some White House officials have reiterated these arguments in recent days, while Trump has hit out at countries targeted by the tariffs, such as Canada and the European Union, who have announced retaliatory countermeasures.

Economists have warned that the actions will drive up inflationary pressures and ultimately weigh on broader U.S. growth. Fears over a possible recession have underpinned a slump in stock markets this year, with the benchmark S&P 500 falling into correction territory -- typically defined as a more than 10% drop from a recent high -- on Thursday.

"It’s hard to spin the Michigan report in any bullish fashion other than to say White House officials might finally start to moderate their agenda in light of the sinking economic outlook, but that remains to be seen," analysts at Vital Knowledge said in a note to clients.