Consumer Sentiment Hits Record Low, Inflation Fears Rise Amid Iran War

Why It Matters

Weak consumer confidence and higher inflation expectations raise the likelihood of continued rate hikes, while Middle‑East tensions add market volatility, affecting corporate earnings and investment decisions.

Key Takeaways

• University of Michigan sentiment hits 47.6, lowest since 1978.
• Inflation expectations rise to 4.8% for next year, highest in years.
• Durable goods orders fall 1.3%, indicating slowing capital spending.
• Factory orders flat, but transportation sector shows strong 1.2% growth.
• Iran conflict heightens uncertainty, pushing rates higher and markets volatile.

Summary

The University of Michigan’s April preliminary consumer‑sentiment survey fell to 47.6, the lowest reading in the index’s 1978‑to‑present history. Current‑conditions and expectations components also slumped to 50.1 and 46.1 respectively, underscoring a broad‑based loss of confidence.

Inflation expectations jumped to 4.8% for the next 12 months, the highest level since mid‑2022, while five‑to‑ten‑year outlook rose to 3.4%. Durable‑goods orders slipped 1.3% (excluding transportation) and the proxy for non‑defense capital spending turned negative, signaling a slowdown in business investment.

Factory orders for February were unchanged at zero, but stripping out transportation revealed a 1.2% rise – the strongest since August 2023. Markets reacted with higher Treasury yields after a warm CPI report, and analysts warned that the unfolding Iran‑Israel conflict could keep volatility elevated.

The confluence of record‑low sentiment, rising inflation expectations and geopolitical risk suggests tighter monetary policy may persist, pressuring equities and consumer‑spending‑sensitive sectors.

Original Description

Consumer outlook plunged to a record low in April as fears mounted over rising energy prices and the broader impact of the Iran war, according to a University of Michigan survey Friday.