U.S. consumer sentiment has fallen to a record low because the Iran conflict is still showing up at the gas pump, not because of headlines about a ceasefire. The University of Michigan’s final April reading came in at 49.8, below March’s 53.3 and only slightly above the 47.6 flash estimate earlier this month.
The bigger shift is in inflation psychology. Year-ahead price expectations jumped to 4.7 percent from 3.8 percent in March, while five-year expectations rose to 3.5 percent, reinforcing the idea that households are bracing for higher costs to linger even if the military situation eases.
That matters because the pressure is moving through a very specific channel: gasoline and diesel. Reuters reported retail gasoline has held above $4 a gallon this month and diesel above $5, a setup that can squeeze low- and middle-income households first and then work its way into freight-heavy goods such as food, appliances and toys.
The immediate policy problem is that softer sentiment is now colliding with stronger inflation expectations, a combination that gives the Federal Reserve less room to ease this year. Even with stocks at record highs, consumers are telling a different story, and it is one that could keep spending under strain if energy prices stay elevated.
