Consumer sentiment slid to a three-month low in March and year-ahead inflation expectations jumped as the war in the Middle East drives up gasoline prices.
The University of Michigan’s final March sentiment index fell to 53.3 from a preliminary reading of 55.5, according to a report released Friday. The survey period includes responses from Feb. 17 to March 23, with about two-thirds of those collected after the Iran war began.
Consumers expect prices to rise at an annual rate of 3.8% over the next year from 3.4% a month earlier, the biggest increase since April 2025. At the same time, longer-term inflation expectations eased.
Gasoline prices have shot up about $1 a gallon on average in the US since the start of the U.S.-Israeli war with Iran, which is about to enter its fifth week. This jolt is compounded by existing worries over higher costs for everyday goods and risks causing consumers to cut back on discretionary spending.
Economists in a Bloomberg survey raised their estimates for inflation through year-end, while tempering expectations for growth, consumer spending and employment.
“The persistence of high prices continues to be the dominant factor for consumer views of the economy, with 47% of consumers spontaneously noting that prices are currently eroding their personal finances,” Joanne Hsu, director of the survey, said in a statement.
She added that year-ahead gas price expectations jumped to the highest since June 2022, when inflation peaked in the wake of Russia’s invasion of Ukraine.
Dillard and Torres write for Bloomberg.
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