Consumer Sentiment Slips as Inflation Expectations Climb — Evening Brief – 04.24.26

Consumer sentiment deteriorated further in April despite a late month rebound tied to a cease-fire and slightly lower gas prices, signaling growing unease about the economic outlook and the staying power of inflation.

The University of Michigan’s Consumer Sentiment Index was revised up to 49.8 from a preliminary 47.6, but still fell from 53.3 in March, slipping deeper into pessimistic territory. One-year inflation expectations eased to 4.7% from an initial 4.8% reading, yet rose sharply from 3.8% in March, marking the biggest one‑month increase since April 2025.

“After the two-week cease-fire was announced and gas prices softened a touch, sentiment recovered a modest portion of its early-month losses,” said Joanne Hsu, director of the Surveys of Consumers. “The Iran conflict appears to influence consumer views primarily through shocks to gasoline and potentially other prices.” Near‑term inflation expectations “exceed those seen in 2024 and remain well above the 2.3-3.0% range seen in the two years pre-pandemic,” Hsu noted.

Longer-run inflation expectations also moved up. The five-year implied inflation rate rose to 3.5%, versus 3.4% in the advance April reading and 3.2% in March, reaching its highest level since October 2025. That drift higher in long‑term expectations will be closely watched by the Federal Reserve as it assesses whether inflation psychology is becoming more entrenched.

Under the hood, consumers’ views on current conditions and the future both softened. The Current Economic Conditions index was revised to 52.5, better than the 50.1 advance print but down from 55.8 in March. The Consumer Expectations index improved to 48.1 from a preliminary 46.1, yet still declined from 51.7 in the prior month, underscoring mounting concern about the outlook for jobs, income, and prices in the months ahead.