U.S. Consumer Sentiment Falls to Record Low as Oil Rises

The University of Michigan reported the Consumer Sentiment Index fell to 49.8 in April from 53.3 in March, the weakest reading in data going back to 1978. The current conditions component reached its lowest level in four months, while the expectations component slipped to its weakest reading in almost a year. Households’ assessments of their future financial situation were at the lowest point since May of last year.

Consumers’ short-term inflation expectations rose to 4.7% for the next 12 months from 3.8% in March. Expectations for five to ten years increased to 3.5%, the highest level since October. About two-thirds of respondents said they expect gasoline prices to be higher in a year, with the average anticipated increase near 50 cents per gallon.

Fuel markets were affected by the conflict with Iran and a near-halt of traffic through the Strait of Hormuz. Goldman Sachs estimates oil production in Gulf countries is roughly 14.5 million barrels per day below pre-war levels, about a 57% decline in regional output. Brent crude rose for a fifth straight day, trading near $105–$106 per barrel, up from below $73 before the conflict and recording a weekly gain of about 17%.

Economists and market analysts warn sustained higher oil prices could feed into broader inflation by raising transport and production costs. That dynamic will be considered by policymakers monitoring price trends and economic indicators.

Retail sales have so far remained relatively resilient. The University of Michigan survey noted consumers are reacting more strongly to geopolitical uncertainty and higher energy costs than earlier in the spring. A temporary ceasefire has reduced the immediate chance of wider escalation, but the lack of a durable settlement leaves shipping routes and production vulnerable to renewed disruption.

The University of Michigan Consumer Sentiment Index is a monthly gauge of household confidence used in forecasts for consumer spending, a major component of U.S. economic activity. The survey’s readings on sentiment and inflation expectations and current oil prices will be part of upcoming economic assessments.