Facing rising inflation, escalating gas prices and volatile financial markets due to the war against Iran, the University of Michigan reported notable pessimism in consumer survey results released Friday, particularly over the short term.
The university’s monthly index of consumer sentiment fell from 56.6 to 53.3, a nearly 6% drop in March to its lowest level since December 2025, according to Joanne Hsu, the director of the university’s Surveys of Consumers. Consumer sentiment was 6.5% lower year over year from its March 2025 sentiment reading of 57.
Interviews for the release were collected between Feb. 17 and March 23, with about two-thirds completed after the start of the U.S. military conflict in Iran on Feb. 28.
Declines were seen across age and political party, Hsu noted in a statement released with the survey results. Consumers in the middle and higher income tiers and those with stock wealth exhibited particularly large drops in sentiment.
While Hsu observed that short-run economic outlook had plunged 14%, and year-ahead expected personal finances sank 10%, declines in long-run expectations were more subdued.
“These patterns suggest that, at this time, consumers may not expect recent negative developments to persist far into the future,” she commented. “These views are subject to change, however, if the Iran conflict becomes protracted or if higher energy prices pass through to overall inflation.”
Survey results also showed consumers’ year-ahead inflation expectations rose to 3.8% this month, up from 3.4% in February. This was the largest one-month increase since April 2025.
The current inflation reading exceeds those seen in 2024 and remains well above the 2.3% to 3% range from the two years immediately preceding the COVID-19 pandemic. Long-run inflation expectations dipped to 3.2%. In 2024, values were between 2.8% and 3.2%, while in 2019 and 2020, they were consistently below 2.8%, according to Hsu.
The next data release from the university for preliminary April data is expected to drop on April 10.
