Consumers are in a funk, University of Michigan survey finds

How’s the economy? Usually, it depends on who you ask. But these days, even more affluent consumers are expressing some doubts.

On the heels of The Conference Board’s February decline in the Consumer Confidence Index, the University of Michigan Consumer Sentiment Index found an even bigger drop-off in March. The survey has fallen to a reading of 57.9, down more than 10% from February. The reading was 27.1% below a year ago and was the lowest since November 2022.

On a positive note, the survey found only a 3.3% decline in how consumers view the current economy. But “expectations for the future” fell more than 15%, down 30% from March 2024.

Consumers appear to be concerned that tariffs on imported goods will set off inflation again, just as some prices appear to be evening out. But even if inflation levels off, it will be a much higher prices than consumers paid just a few years ago.

When it reported quarterly earnings, retailer Dollar General warned that its customer base is buying less because they can no longer even afford essentials. Company CEO Todd Vasos said he doesn’t expect things to improve very much throughout the rest of 2025.

The decline in the University of Michigan Index was observed across all demographic and political groups, with no segment of the population immune to the pessimistic shift. While assessments of current economic conditions remained relatively stable, expectations for the future worsened significantly. 

Consumers cited concerns about personal finances, labor markets, inflation, business conditions, and stock market performance as key reasons for their declining confidence.

Shifting policies

Economic uncertainty, particularly regarding shifting policies, has made it increasingly difficult for consumers to plan ahead, the survey found. This sentiment was echoed across all political affiliations, with Republicans, Democrats, and Independents all agreeing that the economic outlook has weakened since February. 

Despite experiencing a boost in confidence following the election, Republican expectations fell by 10% in March. Independents saw a sharper 12% drop, while Democrats experienced the steepest decline, with their expectations index plummeting by 24%.

Adding to consumer anxieties, inflation expectations surged once again in March. Short-term inflation expectations rose to 4.9% from 4.3% in February, marking the highest reading since November 2022 and the third consecutive month of significant increases. 

The long-run inflation outlook also deteriorated, jumping from 3.5% to 3.9%, the largest month-over-month increase in more than three decades. This surge was primarily driven by a sharp rise in inflation concerns among Independents, building on an already large increase seen in February.