U.S. consumer confidence fell to its lowest level this year as rising oil prices and financial market turmoil compounded in the wake of the Iran war. Consumers' expected inflation rate over the next year rose sharply.
The University of Michigan said Friday that its final consumer sentiment index for March came in at 53.3. The reading was 3.3 points lower than February's final reading of 56.6 and the lowest since December last year. It was also 2.2 points below the preliminary March reading of 55.5 released two weeks earlier. Compared with the final March reading of 57.0 a year ago, the index dropped 3.7 points.
The survey was conducted from February 17 through March 23. Approximately two-thirds of responses were collected after the outbreak of the Iran war.
The current economic conditions index fell 0.8 points from February to 55.8. The consumer expectations index deteriorated 4.9 points to 51.7. One-year expected inflation rose 0.4 percentage points from February to 3.8%, the largest increase since U.S. President Donald Trump imposed tariffs last April. Five-year expected inflation edged down 0.1 percentage points to 3.2%.
Joanne Hsu, director of the University of Michigan's consumer sentiment survey, said the decline was "broad-based across age groups and political affiliations." She added, "The sentiment of upper-middle-income consumers and those holding stock assets deteriorated significantly, particularly due to surging oil prices and unstable financial markets following the Iran war."
"The fact that the decline in long-term economic outlook was relatively smaller than the short-term decline suggests consumers expect the current negative situation will not persist for an extended period," Hsu said. "However, the situation could change if the war drags on or if rising energy prices lead to broader inflation."
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