Michigan Consumer Sentiment Mostly Unchanged In March

Consumer Sentiment remained largely unchanged in late March at the same diminished level recorded at mid month. Inflation has been the primary cause of rising pessimism, with an expected year-ahead inflation rate at 5.4%, the highest since November 1981.

Inflation was mentioned throughout the survey, whether the questions referred to personal finances, prospects for the economy, or assessments of buying conditions. When asked to explain changes in their finances in their own words, more consumers mentioned reduced living standards due to rising inflation than any other time except during the two worst recessions in the past fifty years: from March 1979 to April 1981, and from May to October 2008.

Moreover, 32% of all consumers expected their overall financial position to worsen in the year ahead, the highest recorded level since the surveys started in the mid-1940s. The combination of rising prices and less positive income expectations meant that half of all households anticipated declines in inflation-adjusted incomes in the year ahead.

The sole area of the economy about which consumers were still optimistic was the strong job market. Consumers anticipated in March that during the year ahead it was more likely that the unemployment rate would post further declines than increases (30% versus 24%).