Inflation Fears Drive Consumer Sentiment to Record Low

Summary

The University of Michigan final April sentiment index dropped to 49.8, a record low, slightly above the preliminary reading. Inflation expectations ticked down to 4.7% but the 5-10 year outlook rose to 3.5%. Gasoline prices declined amid war-related uncertainty. The discussion questions whether sentiment surveys are still correlated with consumer spending and the real economy.

• University of Michigan April sentiment index final reading 49.8, record low.
• Inflation expectations one-year ahead fell to 4.7% from 4.8%.
• Five to ten year inflation expectations rose to 3.5% from 3.4%.
• Gasoline prices declined slightly, partly due to war-related fluctuations.
• Consumer sentiment remains depressed but retail sales and earnings have been strong.
• The correlation between sentiment surveys and the real economy has weakened.
• Tax refunds may have boosted spending in Q1 and early Q2.
• Concern that rising gas bills could force consumer cutbacks.