The University of Michigan Consumer Sentiment Index shows that U.S. consumer sentiment dropped to 57.9 in March, down over 6 points from 64.7 in February.
The sentiment has dropped to the lowest level in 28 months, the sharpest drop seen since November 2022. The pessimism among consumers has been due to a surge of concerns about stagflation, recession, and worsening economic conditions in the country due to the Trump economic policies.
Source: University of Michigan Survey of Consumers U.S. consumer sentiment across all political affiliations as of March 2025
The current consumer sentiment has sharply declined across all ages, gender, education, income, wealth, regions, and political affiliations. The University of Michigan Survey of Consumers led by Joanne Hsu revealed that consumer sentiment among Republican consumers dropped to 83.9. Independents and Democrat consumer sentiment dropped to 57.2 and 41.4 in March, respectively.
The survey also indicated that the current decline has been ongoing for three consecutive months, with the fall standing at 22% compared to December 2024. The year-on-year decline stood at over 27% compared to March 2024, when consumer sentiment was at 79.4. Other metrics, such as consumer expectations, have also significantly decreased.
The Consumer Expectation Index dropped from 64.0 in February to 54.2 in March, marking a 15.3% month-on-month decrease. Consumer expectations are also down 30% year-on-year, dropping from 77.4 in March last year. Expectations among Republican consumers declined by 10%, while those of Independents and Democrats dropped by 12% and 24%, respectively. Consumers expect the ongoing policies to affect different economic facets, including personal income, the stock market, inflation, employment, and business conditions.
Consumer inflation expectations rise while spending drops
The Survey of Consumers highlighted an increase in the inflation expectation for the year ahead, jumping to 4.9% in March compared to 4.5% in February. The survey outlined that the expectation had the highest reading recorded since November 2022 and marked the third consecutive month of sharp increases in expectations.
Consumer inflation expectations in the long run also surged from 3.5% in February to 3.9% in March. The survey confirmed that the value marked the highest month-on-month recorded since 1993. All political affiliations also expected that unemployment would worsen in the coming months, with the expectations rising to nearly 5% from below 4%.
Source: University of Michigan Survey of Consumers Inflation and unemployment expectations among consumers in March 2025
U.S. Treasury Secretary Scott Bessent also raised more concerns about a recession after a statement on the NBC Meet the Press Sunday show. Bessent said that there was no guarantee of avoiding a recession. Bessent explained that the government was doing a complete reset to prevent future financial crises, adding that market corrections were normal.
U.S. consumer spending has notably dropped by 0.2% in January for the first time in nearly two years. Monthly consumer spending also dropped for most goods, including motor vehicles, recreational activities, food, beverages, clothing, footwear, and more. Spending on services still increased in January across housing, utilities, financial services and insurance, accommodations, and more. Spending on goods declined by $76.7 billion, while spending on services increased by $46 billion in January.
Consumer sentiment in other economies, including China, has been increasing while the U.S. economy continues to slow. Retail sales in China increased in January and February by around 4.0% compared to one year ago. Production in the country also surged in the first two months of the year, beating earlier expectations.
Trump tariffs raise economic health uncertainty
Trump’s erratic tariff policy is sending economic uncertainty through the roof and tanking markets big time. More vision, less Brando in Apocalypse Now, please. Via @reason https://t.co/RAB5IbLP6X
— Nick Gillespie (@nickgillespie) March 13, 2025
President Trump’s tariffs continue to raise uncertainty about the U.S. economic health, with the Organization of Economic Co-operation and Development (OECD) commenting on the country’s economic slowdown. The OECD quarterly report forecasted a possible plunge in economic health in the U.S. due to Trump’s policies. The report also pointed to the sharp decline in the U.S. capital markets over the past few weeks into the correction zone.
Trump’s tariffs have been cited as one of the major causes of the negative health experienced across the U.S. markets. The president imposed import taxes on goods from Canada, Mexico, the EU, and China, triggering global trade wars. Trump also intends to impose a 25% import tax on global metal imports without exceptions, supposed to go into effect on April 2.
The OECD described the tariffs as ‘Trump’s on-again, off-again levy threats,’ adding to the uncertainty caused across businesses globally. The report insisted that uncertainty caused caution among businesses and their investments in the U.S. Small businesses, which contribute largely to the health of the U.S. economy, have expressed less optimism.
The NFIB Small Business Optimism Index fell by over 2% in February to 100.7 as more businesses cited concerns about the worsening profit trends, sales expectations, and economic growth. Only 12% of businesses notably considered it a favorable time to expand their operations.
