U.S. consumer sentiment fell more than expected in March, touching a three-month low, driven by higher gas prices and inflation expectations following the Iran war, the University of Michigan’s latest monthly survey found.
The survey’s headline Index of Consumer Sentiment Index decreased 5.8 percent to 53.3, from 56.6 in February. Economists polled by The Wall Street Journal were expecting a reading of 54.
A preliminary March reading, released two weeks ago, had estimated the sentiment gauge at 55.5. But uncertainty about the course of the war and higher gas prices have heightened consumer concerns, said Joanne Hsu, the survey’s director.
The survey was conducted between Feb. 17 and March 9, with about half completed after the start of the U.S.-Israeli war with Iran.
The index is down 6.5 percent from 57.0 in March 2025.
The index of Consumer Expectations, which measures consumers’ projections for the next six months, was 51.7, down 8.7 percent from 56.6 in February and off 1.7 percent from 52.6 in March 2025.
The index of Current Economic Conditions, which measures how consumers feel about the state of the U.S. economy and their place in it, reached 55.8, off 1.4 percent from 56.6 in February and down 12.5 percent from 63.8 a year ago.
Hsu said in her commentary, “Consumer sentiment fell back 6 percent this month to its lowest level since December 2025. Declines were seen across age and political party. Consumers with middle and higher incomes and stock wealth, buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment. Overall, the short-run economic outlook plunged 14 percent, and year-ahead expected personal finances sank 10 percent, while declines in long-run expectations were more subdued. These patterns suggest that, at this time, consumers may not expect recent negative developments to persist far into the future. These views are subject to change, however, if the Iran conflict becomes protracted or if higher energy prices pass through to overall inflation. Interviews for this release were collected between February 17 and March 23, with about two-thirds completed after the start of the US military conflict in Iran.
“Year-ahead inflation expectations climbed from 3.4 percent in February to 3.8 percent this month, the largest one-month increase since April 2025. The current reading exceeds those seen in 2024 and remains well above the 2.3-3.0 percent range seen in the two years pre-pandemic. Long-run inflation expectations inched down to 3.2 percent. In 2024, values ranged between 2.8 percent and 3.2 percent, while in 2019 and 2020, they were consistently below 2.8 percent. Note that for both time horizons, interviews completed after February 28th exhibited higher inflation expectations than those completed before that date.”
Image courtesy Globe and Mail
