Consumer Sentiment Slides as Inflation Expectations Surge — Evening Brief – 04.10.26

U.S. consumers turned markedly more pessimistic in early April as geopolitical tensions weighed on confidence and inflation expectations drifted higher, even as hard data on factory orders signaled a stagnant but not collapsing manufacturing backdrop. 

Preliminary data from the University of Michigan showed the Consumer Sentiment Index fell to 47.6 in April, well below the 52.0 consensus and down from 53.3 in March. The drop reflects broad-based weakness across demographics and sentiment components. 

“Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago,” said Surveys of Consumers Director. “Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall.” 

Inflation expectations moved notably higher, with one-year expectations jumping to 4.8% from 3.8%, while five-year expectations edged up to 3.4%. Current conditions fell to 50.1, and future expectations dropped to 46.1. 

“One-year expected business conditions plunged about 20%… Assessments of personal finances declined about 11%,” Hsu noted, adding that “many consumers blame the Iran conflict for unfavorable changes to the economy.” 

Separately, data from the U.S. Census Bureau showed factory orders were flat in February at $619.6 billion, missing expectations and marking a second consecutive month of unchanged activity. Shipments rose 1.4%, while unfilled orders increased 0.1% to $1.54 trillion.