Consumer sentiment toward the economy, a vital metric for gauging whether consumers are feeling comfortable enough to make major purchases, showed positive signs at the outset of 2026. However, per the latest findings from the University of Michigan’s Survey of Consumers, sentiment has started to dip.
The index of Consumer Sentiment fell from 56.6 in February to 55.5 in March; Survey of Consumers Director Joanne Hsu noted in included commentary that this was the lowest rating of 2026 so far. It was also a year-over-year drop from a 57 rating in March 2025.
The index of current economic conditions, measuring how consumers feel about the current state of the economy rose month-over-month in March to 57.8, compared to 56.6 in February. (This is still well below the March 2025 reading of 63.8, though). What showed a noticeable decline was the index of consumer expectations, which measures how consumers expect the economy to perform.
The expectations index dropped from 56.6 in February to 54.1 in March. This is still higher, though, than the March 2025 reading of 52.6. Hsu noted that the decline in expectations can be seen across a “broad swath of consumers,” regardless of income, age or political affiliation.
About half of the survey responses were completed before the start of the U.S. and Iran conflict, and Hsu noted a difference in sentiment could be seen between the two halves.
“Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains,” said Hsu. “Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain.”
Stock prices have taken a noticeable dip since the Iran conflict began as well, with the rising price of crude oil being one reason why. Consumers’ expectations for inflation, which had been declining for six months, also stalled out in March at 3.4% for year-ahead inflation, which remains higher than previously seen in 2024. Long-term inflation expectations inched down to 3.2%, compared to the 2.8% to 3.2% range seen in 2024.
The most recent inflation readings showed a downward trend, but the situation remains unstable due to geopolitical conflicts. The Federal Reserve has consistently said its goal for inflation is reaching an annual rate of 2%. Recently, members of the Fed board of governors have suggested that the conflict with Iran also casts uncertainty on future interest rate cuts.
