Michigan sentiment, inflation expectations 4.7%
- University of Michigan’s final April survey showed consumer sentiment at 49.8, the lowest in the series’ history, even as March consumer spending rose 0.9%. - One-year inflation expectations jumped to 4.7% from 3.8%, while the personal saving rate fell to 3.6% as households kept buying through higher prices. - That gap matters because demand still looks firm now, but weaker confidence and hotter inflation expectations complicate the Fed’s path.
Consumer confidence and consumer spending are supposed to rhyme. Usually they do. When people feel worse about the economy, they pull back. But right now the U.S. is doing the awkward opposite — the University of Michigan’s final April survey showed sentiment collapsing to 49.8, a record low for that series, while the Bureau of Economic Analysis showed March personal consumption expenditures still rising 0.9%. ### What actually broke in the survey? The Michigan survey did not just show a mild wobble. It showed a broad deterioration in how households see business conditions, personal finances, and buying conditions. The final April reading of 49.8 was down from 53.3 in March, and the survey’s own write-up said year-ahead inflation expectations surged from 3.8% to 4.7%, the biggest one-month jump since April 2025. Why does 4.7% matter so much? Because inflation expectations can become self-reinforcing. If households think prices will keep rising fast, they may buy sooner, demand higher pay, or simply stop believing inflation will come back down cleanly. Michigan’s 4.7% one-year expectation is well above the 2.3% to 3.0% range that prevailed in the two years before the pandemic, so this is not just noise around normal. ### So why are people still spending? Part of the answer is simple — spending data and sentiment data are measuring different moments and different behaviors. The BEA report released April 30 showed March personal income up 0.6% and consumer spending up 0.9%, which means households were still opening their wallets before April’s mood fully curdled. The saving rate also fell to 3.6%, suggesting some of that spending great. ### Is this contradiction unusual? Not totally, but it is uncomfortable. Sentiment is often a noisy political and psychological measure, while spending is the thing that actually hits GDP. Households can say they feel awful and still keep traveling, eating out, or replacing essentials — basically the economic version of complaining the whole drive while still getting in the car. The catch is that to keep climbing, behavior tends to catch down to mood. ### What does inflation data add here? It makes the split harder for the Federal Reserve to read. The PCE price index rose 3.5% from a year earlier in March, up from 2.8% in February. So policymakers are not looking at a clean growth scare with easing inflation. They are looking at consumers who feel miserable, expect higher inflation, and are still spending enough to keep demand from cooling quickly. ### Why are markets so focused on this gap? Because short-term growth forecasts depend more on what people do than on what they say. A 0.9% monthly spending gain is real fuel for the economy. But sentiment at a record low is a warning light on the dashboard — especially if higher inflation expectations start changing wage demands, pricing behavior, or election-year politics around the economy. ### What should you watch next? Watch whether April and May spending still holds up, and whether inflation expectations stay elevated or cool back down. If spending remains firm, recession calls will look premature. If spending finally buckles toward the survey mood, then April’s record-low sentiment will look less like whining and more like an early signal. Consumers are scared of inflation, not yet acting like they are broke, and that is exactly the mix that keeps the economic outlook messy.
