U.S. consumer sentiment declined to its lowest level on record in April, as rising fuel costs and inflation concerns continued to weigh on households despite a ceasefire in the Iran conflict. The University of Michigan’s Consumer Sentiment Index fell to a final reading of 49.8 this month, marking an all-time low. Although slightly higher than the preliminary reading of 47.6, the figure remained below economists’ expectations of 48.0 and down from 53.3 recorded in March.
The decline in sentiment was broad-based, cutting across political affiliations and income groups, including consumers with exposure to stock market investments.
Rising energy costs have been a key factor behind the drop. Disruptions in the Strait of Hormuz during the conflict pushed oil prices higher, leading to increased costs for gasoline and diesel. National average gasoline prices remained above $4 per gallon during the month, while diesel prices exceeded $5 per gallon.
Higher fuel prices have also contributed to broader inflation pressures, affecting the cost of goods transported across supply chains. Economists note that such increases are likely to weigh more heavily on low- and middle-income households, where fuel expenses account for a larger share of spending.
Consumer expectations for inflation over the next 12 months rose sharply to 4.7 per cent in April, up from 3.8 per cent in March. Long-term inflation expectations also increased, with the five-year outlook rising to 3.5 per cent from 3.2 per cent.
The rise in inflation expectations adds to concerns in financial markets that the Federal Reserve may delay interest rate cuts this year. Recent data has also indicated that businesses are raising prices at the fastest pace in several years.
Economists warn that continued increases in transportation and energy costs could further impact consumption, potentially slowing overall economic growth.
The latest data highlights ongoing pressure on household confidence, with sentiment closely tied to developments in energy markets and the broader inflation outlook.
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