Consumer Sentiment Falls Further in March, Hits Lowest Level Since Late 2022

Key takeaways:

• Consumer sentiment index fell to 57.0 in March, down from 57.9.
• This marks the lowest level since November 2022.
• Concerns over inflation and economic policy are impacting consumer outlook significantly.

Introduction

The recent data from the University of Michigan indicates a further decline in consumer sentiment, now recorded at 57.0 for March, a drop from the preliminary reading of 57.9. This figure represents the lowest consumer sentiment observed since late 2022, highlighting increasing economic anxieties among consumers and raising concerns among investors.

Detailed Analysis

The final reading of the consumer sentiment index for March fell significantly, indicating a sharp downward trend. This drop is primarily attributed to escalating worries about inflation and economic policies initiated by the current administration. The index has now decreased from a previous reading of 64.7 in February to its current state, reflecting a downturn of approximately 12% ¹.

Specifically, the index of consumer expectations plunged to 52.6, a decrease from 64.0. Meanwhile, the current economic conditions index experienced a more modest decline, retreating to 63.8 from 65.7 in February ⁴.

Joanne Hsu, director of the Surveys of Consumers, noted that two-thirds of respondents expect unemployment to rise in the coming year, a sentiment that resonates with the highest level of concern since 2009. This worrying trajectory reinforces the vulnerability of consumer spending, previously buoyed by strong labor markets and income stability ⁷.

Additionally, the inflation outlook has intensified, with year-ahead inflation expectations climbing to 5.0% from 4.3%, marking the highest since November 2022. Such expectations can constrict consumer spending, which is crucial for the economy. Investors are closely monitoring these developments, given that consumer spending comprises a significant portion of economic activity in the U.S. ⁶.

The apprehensions surrounding inflation are further compounded by the introduction of tariffs by the current administration, particularly those proposed by President Trump, aimed at U.S. trading partners. This development has the potential to amplify inflationary pressures, leading investors to recalibrate their strategies in anticipation of its long-term effects on both the market and consumer behavior ⁸.

The impacts of these declining consumer sentiments are already manifesting in the stock market. Following the release of these figures, indices such as the S&P 500 experienced downward movements as investors weigh the implications of rising inflation concerns on overall economic growth. Many sector players, especially in the retail and consumer discretionary spaces, may feel the pinch of these consumer sentiment trends, influencing investment strategies ².

In conclusion, the decline in consumer sentiment in March underscores heightened anxieties regarding inflation and potential economic slowdowns. Retail investors should consider these indicators carefully as they could foreshadow shifts in consumer behavior and market activity in the near future.

Conclusion

As consumer sentiment dips to its lowest level since late 2022, the implications for the economy and investment strategies cannot be overlooked. Investors will need to remain vigilant and adaptable in the face of potential shifts in consumer spending patterns, economic policies, and market dynamics. Keeping an eye on inflation indicators and consumer outlook will be essential as the year progresses.

References

¹ Consumer sentiment falls further in March, hits lowest level in late 2022. MarketWatch. Retrieved March 28, 2025.

² Stocks Fall as Inflation Anxiety Dampens Mood on Wall Street. The New York Times. Retrieved March 28, 2025.

⁴ Consumer sentiment falls to lowest since November 2022 as labor market optimism continues to fade. Yahoo Finance. Retrieved March 28, 2025.

⁶ Consumer confidence in where the economy is headed hits 12-year low. CNBC. Retrieved March 25, 2025.

⁷ U.S. Consumer Sentiment Slumps More Than Previously Estimated In March. Nasdaq. Retrieved March 28, 2025.

⁸ Consumer sentiment slumps in March to lowest since 2022 as Trump tariffs spark more inflation worries. NBC Los Angeles. Retrieved March 14, 2025.