Topline
Anxiety about the U.S.-Iran conflict and rising gas prices pushed Americans’ view of the economy to the worst level ever recorded, according to the University of Michigan’s consumer sentiment survey that has been running for 48 years.
Key Facts
The consumer sentiment reading for April slid to 49.8 from 53.3 in March, landing just below the previous record low of 50 set in June 2022 during the post-pandemic inflation crisis.
The final 49.8 reading came in slightly above the preliminary April figure of 47.6 published two weeks ago, as responses collected later in the survey period—after the U.S. and Iran agreed to a two-week ceasefire on April 7—turned more positive, per Michigan survey director Joanne Hsu.
Year-ahead inflation expectations surged to 4.7% from 3.8% in March, the biggest one-month jump since President Trump’s sweeping tariff announcement in April 2025.
Nearly two-thirds of respondents expect gas prices to rise over the next year, the largest share since 2022, with consumers pricing in a roughly 50-cent increase at the pump.
The April reading published Friday includes survey responses collected from March 24 to April 20.
Key Background
Sentiment has been sliding since Feb. 28, when the U.S. and Israel launched a joint military campaign against Iran that ultimately shut the Strait of Hormuz and drove global oil prices sharply higher. Gas is now hovering around $4 a gallon, and analysts have warned prices could stay elevated for months even if a permanent deal is reached. Hsu said in a statement that the Iran conflict is shaping consumer views largely through fuel costs and other price increases, and that diplomatic developments that don’t ease supply constraints or bring down energy prices are unlikely to meaningfully lift moods. April’s reading is strikingly dark by historical standards. Consumers now view the economy as gloomier than during the Covid-19 pandemic, the 2008 financial crisis or the stagflation of the late 1970s—a level of despair that’s difficult to square with a labor market that’s still functioning and a stock market that’s held up reasonably well.
Surprising Fact
Despite the record-breaking gloom, there’s limited evidence Americans are actually pulling back. U.S. retail sales surged 1.7% in March, the biggest jump in more than three years. The number is mainly driven by gas prices, with gas station receipts alone surging 15.5%. Strip gas, autos and other volatile categories, and sales still rose 0.7%––more than triple consensus. Major banks reporting first-quarter earnings this month also said household finances are holding up well, though some of this heightened retail activity could be attributed to larger tax returns. Economists at firms including Oxford Economics warned the tailwind from a blockbuster refund season will fade soon, causing households to cut back on discretionary spending as energy costs remain high. Stanford’s Institute for Economic Policy Research estimates war-driven gas price spikes have pushed up Americans’ average annual fuel costs by $857 this year, nearly wiping out the $1,000 average refund boost the Treasury Department projected for this filing season.
Tangent
The Iran war’s price shock is hitting shelves in unexpected corners—including the condom aisle. Karex, the Malaysia-based world’s largest condom maker, which supplies brands including Trojan and Durex, said it was raising prices by up to 30% due to supply chain disruptions from the Middle East war. The price increase is mainly driven by silicone oil, alongside rising costs for nitrile latex, natural rubber and aluminum foil packaging. Karex’s CEO told Reuters that freight costs and shipping delays have contributed to lower stockpiles.
What To Watch For
The absence of a permanent deal in the Middle East is keeping uncertainty elevated among consumers, keeping developments on the war and related gas prices the main area of focus. During next week’s Fed meeting, policymakers will weigh whether the Iran-driven inflation jolt argues for holding rates or cutting them ahead of the Fed’s decision Wednesday. And on Thursday, the Commerce Department will release economic growth estimates for the first three months of the year, providing more data on the state of the U.S. economy.
