Core Data

  • A University of Michigan April survey shows that, hit by high tariffs, the consumer expectations index fell a cumulative 32% in the first four months of the year, the largest drop since the 1990 recession; the one-year inflation expectation rose from 5% last month to 6.5%, the highest level since double-digit inflation in 1981.
  • The consumer sentiment index fell 8% this month compared with March; the five-to-ten-year inflation expectation (a key indicator watched by the Federal Reserve) rose from 4.1% in March to 4.4% in April, far above the central bank's 2% target.
  • "Consumers perceive risks across multiple aspects of the economy, largely stemming from ongoing trade policy uncertainty and concerns that inflation may pick up again," Joanne Hsu, director of the University of Michigan's consumer survey, said in a statement.

Deep Dive

Since President Trump imposed sweeping tariffs on trading partners earlier this month, including a 10% baseline tariff and a 145% tariff on Chinese imports, "soft data" indicators of business and consumer outlooks have fallen sharply.

"Some measures of business and consumer expectations now look fully recessionary," Goldman Sachs chief economist Jan Hatzius said in a report, while noting that "hard data" such as employment and economic growth remain relatively stable for now.

Apollo Global Management chief economist Torsten Sløk said on Friday that consumers may soon see their concerns become reality, noting that daily monitored container shipping volumes between China and the U.S. are plunging. "The consequence will be empty shelves in U.S. stores in a few weeks, and consumers and businesses using Chinese products as intermediate goods will face COVID-like shortages," he wrote in a client note.

"In addition, we will soon see inflation rise because in categories where China is a major supplier of certain goods to the U.S. market, the quantities are quite substantial," Sløk added.

He predicted that starting in May, layoffs will occur in trucking, logistics, and retail, especially in small independent stores selling hardware, toys, and men's clothing. "There are 9 million people in trucking-related jobs and 16 million in retail, so the downside risk to the economy is enormous," Sløk said.

Although the unemployment rate was only 4.2% in March, households are anxious about the employment outlook. "Labor market expectations remained bleak in April," Hsu said. "More concerning is that consumers expect weak income growth for themselves over the next year. Without reliable strong income, spending is unlikely to remain robust when consumers perceive numerous warning signals."

Hsu noted that about 60% of consumers this month voluntarily mentioned tariffs during survey interviews, up 16 percentage points from March. Tariff concerns span the political spectrum: 59% of independents and 44% of Republicans mentioned import tariffs, and respondents expect tariffs to further drag on economic growth. According to Hsu, nearly two-thirds of respondents expect the unemployment rate to rise over the next 12 months, more than double the level six months ago. Additionally, about 67% of consumers expect their purchasing power to decline over the next year, up 8 percentage points from October 2024.