By Lucia Mutikani
WASHINGTON, April 24 (Reuters) – U.S. consumer sentiment fell to a record low in April as households shrugged off a ceasefire in the war with Iran, remaining focused on the inflation fallout from the conflict.
The University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index dropped to a final reading of 49.8 this month, an all-time low. The reading was a slight improvement, however, from the 47.6 reported earlier in the month.
Economists polled by Reuters had forecast the index at 48.0. It was at 53.3 in March. The deterioration in sentiment was across political party affiliation, and among consumers with investments in the stock market.
The Iran war has disrupted shipping in the Strait of Hormuz, boosting the price of oil, and ultimately the cost of gasoline and diesel. Prices for other commodities, including fertilizers, petrochemicals and aluminum, which will soon impact consumers, have also surged.
Tehran effectively closed the strait after the start of the war on February 28. President Donald Trump this week indefinitely extended the ceasefire with Iran, though a U.S. Navy blockade of Iranian ports remained in effect.
“The Iran conflict appears to influence consumer views primarily through shocks to gasoline and potentially other prices,” said Joanne Hsu, the director of the Surveys of Consumers. “In contrast, military and diplomatic developments that do not lift supply constraints or lower energy prices are unlikely to buoy consumers.”
GASOLINE AND DIESEL PRICES INCREASE
The national average retail gasoline price has hovered above $4 a gallon this month, with diesel well above $5 a gallon, data from the U.S. Energy Information Administration showed.
A Reuters/Ipsos poll on Friday showed a clear majority of Americans blamed Trump for surging gasoline prices, which are weighing on his Republican Party ahead of November’s congressional midterm elections.
Expensive diesel is likely to raise prices of goods transported by road. Economists said while the correlation between consumer sentiment and spending was weak, they expected households, especially lower-income groups, to scale back on consumption.
“We expect the hit to real disposable income growth from higher gas prices will slow consumption growth,” said Grace Zwemmer, a U.S. economist at Oxford Economics. “The impact will be mostly felt by low- and middle-income households, since a larger share of their overall spending goes toward gasoline.”
The survey’s measure of consumer expectations for inflation over the next year jumped to 4.7% this month from 3.8% in March. April’s reading exceeded levels that prevailed in 2024 and remained well above the 2.3%-3.0% range seen in the two years before the COVID-19 pandemic.
Consumers’ expectations for inflation over the next five years climbed to 3.5% from 3.2% last month.
Higher inflation expectations added to a survey from S&P Global on Thursday showing a measure of prices charged by businesses for their goods and services jumped in April to the highest level in nearly four years in strengthening financial market expectations that the Federal Reserve would probably not cut interest rates this year.
“More pain will come as higher transportation costs are passed along for food, appliances, toys and every other item that travels on a ship, car or plane,” said Heather Long, chief economist at Navy Federal Credit Union. “Sentiment won’t improve until the Strait of Hormuz is open and there is a permanent end to the conflict.”
(Reporting by Lucia Mutikani in Washington; Editing by Chizu Nomiyama and Matthew Lewis)
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