US Consumer Confidence Plunges As Inflation Fears Hit Highest Level Since 1993

Consumer confidence in the U.S. plunged to its lowest level in four months, raising concerns about a slowing economy and persistent inflation, according to data released Friday by the University of Michigan.

With inflation expectations jumping to their highest level in decades, fears of a stagflationary environment—where growth stagnates while inflation remains elevated—are mounting.

The University of Michigan said its preliminary March Consumer Sentiment Index fell from February's 64.7 to 57.9 points, well below economists’ expectations of 63.1. This marks an 11% monthly drop and a staggering 22% decline from December 2024.

The report also showed that consumer expectations for future economic conditions plummeted, with the Consumer Expectations Index falling to 54.2 from 64.0, well below the 64.3 consensus forecast.

Meanwhile, the Current Conditions Index, which measures consumers' assessment of their present financial situation, dropped slightly to 63.5 from 65.7.

Year-ahead inflation expectations jumped from 4.3% in February to 4.9% in March, the highest since November 2022.

Long-run inflation expectations surged from 3.5% to 3.9%, marking the largest increase since 1993.

University of Michigan Consumer Sentiment Survey – March 2025

Indicator	March 2025	February 2025	Consensus Estimate (TradingEconomics)	Key Takeaway
Consumer Sentiment Index	57.9	64.7	63.1	Lowest level since November 2023, down 22% from December 2024.
Consumer Expectations Index	54.2	64.0	64.3	Lowest since July 2022
Current Conditions Index	63.5	65.7	65.0	Four straight months of decline
1-Year Inflation Expectations	4.9%	4.3%	N/A	Highest since November 2022
5-Year Inflation Expectations	3.9%	3.5%	N/A	Highest since March 1993

Chart: 5-Year Inflation Expectations Jump To A 32-Year High

What's Driving the Decline In Confidence?

The report revealed that confidence deteriorated across all demographic and political groups.

Sentiment fell "consistently across all groups by age, education, income, wealth, political affiliations, and geographic regions," Joanne Hsu, director of the Surveys of Consumers, said.

According to the survey, consumers are increasingly worried about inflation, business conditions, stock markets, and labor markets.

Frequent shifts in economic policy and uncertainty around government actions are making it increasingly difficult for consumers to plan for the future, Hsu said.

Even though Republicans initially felt more optimistic after the 2024 elections, their expectations index still fell 10% in March. Independents and Democrats reported even steeper declines of 12% and 24%, respectively.

The spike in both short-term and long-term inflation expectations could challenge the Federal Reserve’s plans for potential rate cuts in 2025, as persistent price pressures remain a top concern for consumers.

Market Reactions

The S&P 500 trimmed session gains following the UMich sentiment report. The index – as tracked by the SPDR S&P 500 ETF Trust SPY – was up 1.5% before the release but moderated to a 0.7% increase by 10:15 a.m. ET.

Treasury yields were higher for the session, with the 10-year yield rising to 4.30%, reflecting concerns that persistent inflation could delay Fed rate cuts.

The U.S. dollar index – tracked by the Invesco DB USD Index Bullish Fund ETF UUP – dipped 0.1%, heading for its second consecutive week of declines.

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