Yahoo Finance

Key Takeaways

• March's edition of the Michigan Consumer Sentiment Index fell 12% from February as economic anxiety from President Donald Trump’s tariff policies spread.

• Inflation expectations moved higher and consumers voiced more concerns about the labor market and future business conditions.

• The results mirror a similar survey released earlier this week and come as Friday's inflation report indicated consumers could be pulling back their spending.

Consumers turned even gloomier in March as anxiety about the economy spread beyond tariff policy to include worries over the labor market, personal finances, and business conditions.

The Michigan Consumer Sentiment Index was 57 in March, down 12% from February and declining for the third straight month. Continuing concerns about potential higher prices caused by President Donald Trump’s tariff policies drove the index lower, and the survey showed declining sentiment from all demographic and political affiliations.

“Consumers continue to worry about the potential for pain amid ongoing economic policy developments,” said Michigan Surveys of Consumers Director Joanne Hsu.

Tariff Worries Driving Inflation Expectations Higher

It’s the second consumer survey released this week to show worsening perceptions of the economy, following Tuesday’s declining consumer confidence reading.

Both consumer surveys point to worries that Trump’s tariff policies—which some economists have warned will raise prices—are adding pressure to consumers who are already fatigued by high prices. In the latest Michigan survey, consumers expected inflation to reach 5% over the next year, the highest reading since 2022.

“For now, inflation has re-emerged as a significant—and growing—concern for consumers, one that will undoubtedly influence household spending decisions in the near term,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors.

Consumers Increasingly Worried Over Personal Finances, Business Conditions

The Michigan report also showed that consumers are increasingly worried about the labor market. Two-thirds of survey respondents expect unemployment to rise in the year ahead, the highest reading since 2009.

“This trend reveals a key vulnerability for consumers, given that strong labor markets and incomes have been the primary source of strength supporting consumer spending in recent years,” Hsu said.

The survey’s expectation index also declined sharply, as Hsu said consumers ramped up their anxiety over their personal finances and future business conditions. The decline in sentiment also comes alongside Friday's release of the Personal Consumption Expenditures (PCE) survey, which showed that consumers pulled back on their spending in February.