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Key Takeaways
- March's edition of the Michigan Consumer Sentiment Index fell 12% from February as economic anxiety from President Donald Trump’s tariff policies spread.
- Consumers are more concerned about the future of business and the labor markets and have raised their expectations for inflation.
- The results mirror a similar survey released earlier this week and come as Friday's inflation report indicated consumers could be pulling back their spending.
In March, consumers became even more gloomier as concerns about the economy grew beyond the tariff policy and included worries over the employment market, personal finances and business conditions.
The Michigan Consumer Sentiment Index in March was 57, down 12% since February and down for the third consecutive month. Continuing concerns about potential higher prices caused by President Donald Trump’s tariff policies drove the index lower, and the survey showed declining sentiment from all demographic and political affiliations.
Joanne Hsu is the director of Michigan Surveys of Consumers. She said, “Consumers are still concerned about the possibility of pain as a result of economic policy developments.”
Inflation expectations are higher due to tariff worries
The second consumer survey this week shows a worsening perception of the economy. This follows Tuesday’s decline in consumer confidence.
Both consumer surveys point to worries that Trump’s tariff policies—which some economists have warned will raise prices—are adding pressure to consumers who are already fatigued by high prices. In the most recent Michigan survey, consumers predicted that inflation would reach 5% within the next 12 months, the highest level since 2022.
“For now, inflation has re-emerged as a significant—and growing—concern for consumers, one that will undoubtedly influence household spending decisions in the near term,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors.
Consumers Worried about Personal Finances and Business Conditions
The Michigan report also revealed that consumers are becoming increasingly concerned about the job market. Two-thirds expect unemployment will rise in the next year, the highest level since 2009.
Hsu said, “This trend shows a key vulnerability in consumers given that strong labor markets have been the primary source for strength supporting consumer expenditures in recent years.”
Hsu noted that the survey’s expectation index had also dropped sharply as consumers increased their anxiety over personal finances and future business conditions. The drop in sentiment coincides with the release of Friday’s Personal Consumption Expenditures survey (PCE), which showed that consumers cut back on their February spending.
“Downside risks are increasing for the economy as a weak sentiment follows dispiriting personal income and expenditure data released earlier this morning. Oren Klachkin is a Nationwide financial market analyst.
