US Consumer Sentiment Slumps as Inflation Expectations Surge in April

The University of Michigan's preliminary April reading showed a significant drop in US consumer sentiment to 47.6, missing the market estimate of 52.0. In a concerning trend, one-year inflation expectations surged to 4.8% from 3.8% in March, marking the sharpest monthly increase since early 2025. Long-term five-year inflation expectations also ticked higher to 3.4%, reaching their highest level since November 2025. The survey data primarily reflects the peak of geopolitical tensions with Iran, as 98% of interviews were completed before the April 7 ceasefire announcement. Market participants view these results as stagflationary, combining weakening consumer confidence with persistent upward pressure on prices. While the data is impactful, its influence may be tempered by the fact that it predates recent improvements in the geopolitical landscape.