Consumer sentiment falls amid Middle East conflict

Consumer sentiment fell this month amid the conflict between the United States/Israel and Iran, according to the University of Michigan Surveys of Consumers. .The index tracking consumer sentiment fell nearly 2 percent from the previous month to 55.5 from 56.6, and was down 2.6 percent from March 2025. The current economic conditions index increased 2.1 percent to 57.8 from 56.6 in February, but was down 9.4 percent from 63.8 from 12 months earlier. The index tracking consumer expectations fell 4.4 percent to 54.1 from 56.6 in February, but was nearly 3 percent higher than its year-earlier mark. Consumers across income brackets, age and political affiliation reported drops in expectations for personal finances, down 7.5 percent nationally. Responses were collected between Feb. 17 and March 9. During that time, the United States and Israel took military action against Iran, sparking economic uncertainty over a spike in oil prices and the undetermined length of the war. “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 Surveys of Consumers Director Joanne Hsu. “Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of pass-thru to other prices remains highly uncertain.”Year-ahead inflation expectations ended six straight months of declines, remaining at 3.4 percent, exceeding those in 2024 and higher than the 2.3-3.0 percent range in the two years leading up to the pandemic. Long-range inflation expectations stepped down to 3.2 percent. Both readings were higher for those who responded after the war began Feb. 28. Lower consumer expectations were also reflected in The Conference Board Consumer Confidence Index, which increased 2.2 points to 91.2 from 89.0 in January. The index based on consumer assessments of current business and labor market conditions fell 1.8 points to 120.0, while the index based on consumers’ short-term outlook for labor, income and business conditions increased 4.8 points to 72.0. “Confidence ticked up in February after falling in January, as consumers’ pessimistic expectations for the future eased somewhat,” said Chief Economist Dana Peterson.