U.S. consumer sentiment continues its downward spiral declining each month so far in 2025 with April's preliminary estimate coming in at 50.8 vs. March's final reading of 57.0 and 64.7 in February, below expectations for 55.0 in the Econoday survey of forecasters.

"Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month," the report says."The share of consumers expecting unemployment to rise in the year ahead increased for the fifth consecutive month and is now more than double the November 2024 reading and the highest since 2009."

The report notes that the survey collected responses before the announcement of the 90-day pause in higher reciprocal tariffs.

This decline in sentiment was pervasive and unanimous across age, income, education, geographic region, and political affiliation. It has plummeted more than 30% since December 2024.

The preliminary year-ahead inflation expectations surged to 6.7 percent in April, jumping from 5 percent in March. This is the highest reading since 1981 and marks four consecutive months of unusually large increases.

Long-run inflation expectations in April went up to 4.4 percent from 4.1 percent last month.

Consumer sentiment is seen continuing down to 55.0 in the preliminary April report from a low 57.0 in March and 64.7 in February. Risk for a still weaker number given devastating losses in financial markets after President Trump’s tariff announcements.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.