Consumer sentiment hits record low, inflation fears rise amid Iran war

Consumer confidence took a nosedive in April, hitting a record low as concerns about rising energy prices and the potential fallout from the Iran war weighed heavily on Americans’ minds. The University of Michigan released its latest survey on Friday, revealing that the headline index of consumer sentiment plummeted to 47.6. This marked a significant 10.7% drop from the previous month and represented the lowest level on record. Both the current conditions and expectations indexes also saw substantial double-digit declines.

One of the driving factors behind the sharp decline in sentiment was a notable increase in inflation expectations. Survey respondents anticipated prices to rise by 4.8% in the next year, a full percentage point jump from the March reading and the highest level since August 2025. The escalation in inflation forecasts can be attributed to President Donald Trump’s announcement of tariffs on “liberation day” following the Iran conflict.

According to Joanne Hsu, the director of the survey, many consumers attribute the unfavorable changes in the economy to the Iran conflict. However, she pointed out that the majority of the interviews were conducted before the April 7 ceasefire, indicating that the survey primarily reflects conditions from March. Hsu remains optimistic that economic expectations will improve once consumers are confident that the supply disruptions from the Iran conflict have ceased and gas prices have stabilized.

The release of the survey coincided with the Bureau of Labor Statistics’ report that the all-items consumer price index rose by 0.9% in March, pushing the 12-month inflation rate to 3.3%. The surge in energy prices was identified as the primary driver behind the increase in the headline number, with food inflation remaining relatively stable.

In addition to short-term inflation expectations, the University of Michigan survey also indicated a rise in inflation forecasts for the five-year period, reaching 3.4%. This represented a 0.2 percentage point monthly increase but was still lower than the level recorded a year ago.

It is important to note that the initial release of the survey in April predominantly reflects economic conditions from March. As the situation evolves and uncertainties surrounding the Iran conflict dissipate, there is potential for a rebound in consumer confidence and economic expectations.

In conclusion, the latest data paints a concerning picture of consumer sentiment and inflation expectations, highlighting the impact of external factors such as geopolitical tensions and energy prices on the economy. As policymakers and market participants monitor these developments closely, the hope is that stability and confidence will be restored in the coming months.