American consumers expect prices to rise by 6.7% over the next year, according to a closely watched survey of consumer sentiment from the University of Michigan.
The inflation expectation figure is the highest recorded since 1981.
Every month, the University of Michigan’s Surveys of Consumers asks Americans to predict the rate of inflation over the next year. As recently as December, consumers expected an annual inflation rate of 2.8%. The survey figure rose to 4.3% in February, 5% in March and 6.7% in April, based on preliminary data.
The last time inflation expectations ran that high was in 1981, toward the end of a historic period of high prices, remembered by the Federal Reserve as The Great Inflation.
Consumer confidence has plummeted in recent months, Michigan researchers report, amid spiraling fears about President Donald Trump’s campaign of import tariffs. The university’s index of consumer sentiment fell to 50.8 in April from 57 in March. In December, the index stood at 74.
“This decline was, like the last month’s, pervasive and unanimous across age, income, education, geographic region, and political affiliation,” said Joanne Hsu, director of the Surveys of Consumers, in written comments. “Sentiment has now lost more than 30% since December,” she wrote, “amid growing worries about trade war developments that have oscillated over the course of the year.”
Consumers, economists growing worried about inflation
The Michigan survey comes as the financial industry is growing more concerned about inflation. Just last month, the Federal Reserve forecast its preferred inflation measure would rise to 2.7% by year’s end.
This week, by contrast, the investment firm Vanguard predicted prices will rise nearly 4% in 2025.
In another consumer confidence survey, from The Conference Board in March, Americans said they expect prices to rise by 5.1% in the next year.
“Forecasting where inflation was headed since the pandemic has been a humbling experience for economists and financial markets, but consumers have done a fairly good job,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “Therefore, the rise in near-term inflation expectations should not be ignored and is being driven by tariffs.”
Market analysts pay attention to the Michigan survey on inflation expectations. Historically, consumers have proven fairly accurate in predicting the actual inflation rate, Hsu said.
Economists also worry about signs of flagging consumer confidence, because ennui can prompt consumers to stop spending. Jittery consumers, in turn, can sink the economy.