US Consumer Sentiment Sours Further In March As Fears Of Ukraine War's Impact On Prices Climb

Russia’s war in Ukraine and the persistent increases in inflation are weighing down on U.S. consumers, who lament that the current situation is here to stay for the foreseeable future.

According to the monthly survey of consumer sentiment from the University of Michigan that was released on Friday, rising inflation has put a severe dampening on Americans’ expectations that the future will soon be brighter than the present.

The index for consumer sentiment was 59.7, a 4.9% fall from February and a 29.7% drop since the same time last year. Consumer expectations were at 54.4, a 8.4% drop from last month.

In terms of how Americans gauged current economic conditions, the view was sour. On this measure, the score was 67.8, 0.6% lower than last month, but not a sharp decline likely because of the persistently poor assessments Americans have had about the U.S. economy for months.

Richard Curtin, chief economist of the Surveys of Consumers at the University of Michigan, noted that Americans liken the current economy with past periods, including the period between 1965 and 1982 that saw persistent demand that evolved into stagflation. Today’s government policy, he said, has prioritized federal spending and full employment over price stability, which has enabled inflation to grow.

"The greatest source of uncertainty is undoubtedly inflation and the potential impact of the Russian invasion of Ukraine. In the March survey, 24% of all respondents spontaneously mentioned the Ukraine invasion in response to questions about the economic outlook," said Curtin.

From the weeks leading up to the war, President Joe Biden warned the American public that the war and U.S. sanctions on Russia would be felt at home. Earlier this week, Biden acknowledged the rise in gas prices related to the war, but promised his administration would do more to bring them down and discourage price gouging.

A meeting of the Federal Reserve is set for next week featuring a much-anticipated decision to hike interest rates. Fed Chairman Jerome Powell said the war in Ukraine was doing little to influence the central bank’s desire to raise rates. However, Powell has signaled that his approach to rate increases will err on the side of caution despite demands from some colleagues to be bolder.