Economic sentiment among U.S. consumers declined at the beginning of March, according to preliminary monthly survey results published by the University of Michigan.
The university’s index of consumer sentiment declined to 55.5 from 56.6 in February, a 1.9% drop over the month and 2.6% lower than a year ago, reflecting one of the first public readings on consumer outlooks since the U.S. and Israel started a war with Iran on Feb. 28.
Joanna Hsu, director of Surveys of Consumers at the university, noted immediate impacts on consumers from the conflict in a statement released with the survey results.
“Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month,” explained Hsu, “but lower readings seen during the nine days thereafter completely erased those initial gains.”
Borrowing costs on mortgages have surged back above 6% since the war began, causing kinks in critical energy supplies, disrupting global trade and sparking renewed inflation fears.
“Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain,” added Hsu.
A pair of government inflation reports released this week showed consumer prices well above the U.S. central bank’s stated 2% target for annual inflation growth. The consumer price index eased to 2.4% in February from 2.5% in January, but the personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — remained closer to 3% in January.
February PCE data is not due out until early April, though Fed officials will meet next Tuesday and Wednesday, March 17 and 18, for their second policy meeting of 2026. Futures traders have priced a greater than 99% probability on the Fed leaving the federal funds rate unchanged at its current range of 3.5% to 3.75% next week, according to CME Group data.
Even with tax return season ahead, “a broad swath of consumers” across income brackets and political affiliations reported declining outlooks for personal finances in the university’s survey, sending that component index lower by 7.5% over the month. Outlooks on current economic conditions bumped 2.1% higher in March, however, while remaining 9.4% lower than a year ago.
Survey results also showed consumers’ year-ahead inflation expectations stalled at 3.4%, ending six months of consecutive declines. That reading exceeds inflation expectations reported in 2024, when they ranged between 2.8% and 3.2%, and it remains well above the 2.3% to 3% range in the two years prior to the COVID-19 pandemic, according to the university.
