By Matt Grossman
Consumer sentiment fell in April to the lowest level recorded in the 70-plus-year history of the University of Michigan's survey, evidence of Americans' concerns that the Iran war will hit the domestic economy.
The survey's initial April reading came in at 47.6, versus 53.3 in March. Analysts polled by The Wall Street Journal were expecting a drop to 52. The April reading is below the previous low point of 50 recorded in June 2022, when the economy was facing searing inflation.
The initial April results are based almost entirely on interviews that took place between March 24 and April 6, before a tentative cease-fire took hold on Tuesday, April 7. The survey will be updated with a final April reading later this month, based on more recent responses.
The darker economic mood was widespread across people of different ages, income levels and political affiliations, said Joanne Hsu, the survey's director. "Many consumers blame the Iran conflict for unfavorable changes to the economy," she said.
Hsu added that if this week's cease-fire holds and allows gas prices to moderate, spirits could rebound. "Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated, " she said.
Near-term inflation expectations rose sharply. Potentially more worrying for the Federal Reserve, there also was a smaller increase in long-term inflation expectations.
Policymakers won't be surprised that consumers expect costs to climb in the months ahead, with gasoline prices surging. But they may be more concerned about the rise in inflation expectations farther out, which could suggest declining confidence in the Fed's credibility as a force for stable prices in the longer run.
Since the war began, other gauges of consumer sentiment have remained more positive. A survey published last week by The Conference Board, a research group, found that sentiment improved in March, countering the Michigan survey's finding that it declined. The Conference Board's April result is due April 28.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
04-10-26 1105ET
