The latest data from the University of Michigan’s monthly Index of Consumer Sentiment paints a bleak picture of the American economic outlook. According to Surveys of Consumers Director Joanne Hsu, the final results for March 2025 confirm a significant and widespread decline in consumer sentiment, marking the third consecutive month of dwindling optimism. This deepening pessimism, fueled by concerns spanning personal finances, business conditions, unemployment, and persistent inflation, transcends political and demographic divides, suggesting a unified anxiety about the economic trajectory.
On their website, they said that consumer sentiment confirmed its early-month reading and fell for the third straight month, plummeting 12% from February. The expectations index plunged a precipitous 18% and has lost more than 30% since November 2024.
“This month’s decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation”, wrote Hsu. Consumers remain concerned about the possibility of economic pain due to ongoing policy developments. Notably, two-thirds of them expect unemployment to rise in the coming year, marking the highest level of concern since 2009. This trend highlights a significant vulnerability for consumers, as strong labor markets and rising incomes have been the main drivers of consumer spending in recent years.
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Year-ahead inflation expectations rose from 4.3% last month to 5.0% this month, marking the highest level since November 2022. This increase represents three consecutive months of significant rises of 0.5 percentage points or more. The rise this month was observed across all three political affiliations. Long-term inflation expectations surged from 3.5% in February to 4.1% in March, driven largely by a notable increase among independents and a substantial rise among Republicans. As with other measures from the Surveys of Consumers, the overall trends are influenced predominantly by the views of independents and are not being swayed by polarization between the major parties.