Consumer Sentiment: Worries Tied to Tariff Issues

By SBE Council at 26 April, 2025, 8:01 am

by Raymond J. Keating -

The latest consumer sentiment report from the University of Michigan provided more evidence of growing worries among consumers.

The Index of Consumer Sentiment declined in April by 8.4 percent versus the previous month, and was off by 32.4 percent versus a year earlier.

It was reported, "Expectations have fallen a precipitous 32% since January, the steepest three-month percentage decline seen since the 1990 recession." The following historical chart from the University of Michigan puts the current level of consumer sentiment in a full and rather grim perspective.

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Consumers were worried about tariffs, inflation and jobs: "Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead. Labor market expectations remained bleak."

Regarding inflation, it was noted:

"Year-ahead inflation expectations surged from 5.0% last month to 6.5% this month, the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more. This month's rise was seen across all three political affiliations…"

However, it also was pointed out, "After the April 9 partial pause in tariff increases, inflation expectations ebbed but remained substantially elevated relative to March. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents."

As for the possibilities of recession and/or higher inflation, and general pessimism and uncertainty among consumers, businesses and investors, it must be noted that these all tie back to tariffs and a trade war. Reverse course and get back to reducing governmental costs on and barriers to trade - and the uncertainty and concerns would largely evaporate.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .