April 25, 2025

The final estimate of consumer sentiment for April fell 4.8 points to 52.2 which compares to the preliminary estimate of 50.8.  This index declined 10.7 points in March and 3.4 points in February.  This is the fourth consecutive decline in sentiment.  The January level is the lowest since June 2022.

Surveys of Consumers Director Joanne Hsu said, “Consumer sentiment fell for the fourth straight month, plunging 8% from March. While the April decline in current conditions was modest, the expectations index plummeted with drop-offs in personal finances as well as business conditions. Expectations have fallen a precipitous 32% since January, the steepest three-month percentage decline seen since the 1990 recession. While this month’s deterioration was particularly strong for middle-income families, expectations worsened for vast swaths of the population across age, education, income, and political affiliation. Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead. Labor market expectations remained bleak. Even more concerning for the path of the economy, consumers anticipated weaker income growth for themselves in the year ahead. Without reliably strong incomes, spending is unlikely to remain strong amid the numerous warnings signs perceived by consumers.”

She added that,, Year-ahead inflation expectations surged from 5.0% last month to 6.5% this month, the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more. This month’s rise was seen across all three political affiliations. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents.”

While this is a rather dramatic-looking drop in confidence, the last time that confidence fell this low was when inflation was at its peak.  But the steep drop never translated into a reduction in consumer spending.  Unfortunately, the relationship between confidence and spending has not worked well for the past several years.

The uncertainty regarding policy, tariffs in particular, is taking a toll.  In fact, as noted above, inflation expectations rose from 5.0% in the coming year to 6.5%.  That is a huge monthly jump and is, apparently, attributable to tariffs.  We actually expect inflation to be fairly steady in the coming year as reduced wage pressures and falling home prices keep inflation in check.  A big pickup in the inflation rate seems highly unlikely.  Consumers appear to be overly concerned.

Both the University of Michigan’s consumer sentiment index and the Conference Board’s measure of consumer confidence have fallen sharply.  The two series can diverge from one month to the next, but the trends are similar.

W. expect to see 0.5% GDP growth in first quarter as extremely bad weather in January and the wildfires in California take a toll, and 2.0% GDP growth for 2025 as a whole.

Consumers’ assessment of current conditions declined 4.0 points  from.63.8 to 59.8

Consumer expectations for six months from now fell 5.3 points from 52.6 to 47.3..

Stephen Slifer

NumberNomics

Charleston, SC