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

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 decline reflected weaker assessments of both current conditions and expectations for the year ahead. The current conditions component dropped to its lowest level in four months, while the expectations component slid to its weakest point in almost a year. Households’ views of their future financial situation reached their lowest level since May of last year.

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

Energy market disruptions were a central factor in the survey. Brent crude rose for five consecutive trading days and traded around $105–$106 per barrel after the conflict began, compared with under $73 per barrel before the outbreak. Weekly gains for Brent were about 17%. Ship traffic through the Strait of Hormuz has been nearly halted, reducing a major route for oil shipments.

Estimates from Goldman Sachs indicate Gulf oil production is about 14.5 million barrels per day lower than before the conflict, a decline representing roughly 57% of prior regional output. Those estimates indicate that, even if the strait were to reopen safely and no further attacks occurred, returning production to pre-conflict levels would likely take several months.

Retail sales have remained relatively solid to date, but the survey shows growing household concern about higher everyday costs. The University of Michigan Consumer Sentiment Index is a widely watched monthly gauge of U.S. household attitudes; the April reading reflects recent geopolitical and energy market developments that respondents cited as factors affecting their outlook.