LIVE MARKETS-Consumer sentiment tanks, inflation expectations soar amid Trump policy chaos

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CONSUMER SENTIMENT TANKS, INFLATION EXPECTATIONS SOAR AMID TRUMP POLICY CHAOS

The mood of the American consumer, who shoulders the burden of about 70% of the U.S. economy, has darkened considerably this month.

The University of Michigan's (UMich) preliminary take on March Consumer Sentiment USUMSP=ECI dropped 6.8 points to 57.9, a much steeper slide than the 1.6 dip analysts expected.

It was the most pessimistic reading since May 2023.

Survey participants' assessment of current conditions fell by 3.3%, while near-term expectations plummeted by 15.3%.

The dire report echoes other recent survey data, which shows business and consumer outlooks growing increasingly gloomy as amid mounting uncertainties surrounding U.S. President's chaotic policy moves.

"We see a reflection of the Great Uncertainty around the economic policies put forward by the Trump administration in these results," writes Carl Weinberg, chief economist at High Frequency Economics. "Consumers are buffeted by on-again-off-again threats of tariff walls, government restructuring, public sector layoffs, deportations and other chaotic news from Washington."

A Reuters/Ipsos poll of Americans conducted March 11-12 showed that 57% of survey participants believe Trump's moves to shake up the economy, which include deep cuts in government spending and mass firings of federal workers, are too erratic, and 53% think the tariff war will do more harm than good.

Near- and long-term inflation expectations heated up considerably, with respondents seeing annual inflation at 4.9% a year from now, up from 4.3% in February and 1.8 percentage points hotter than the most recent core CPI reading.

Five-year inflation expectations rose 0.4 ppts to 3.9%.

While consumer surveys aren't reliable inflation predictors, they are closely watched by Powell & Co, because they can suggest an "inflation mentality," which can become a self-fulfilling prophecy.

(Stephen Culp)

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