Consumer sentiment in the United States declined in March as escalating conflict in the Middle East and rising inflation expectations rattled household confidence.
The University of Michigan Consumer Sentiment Index fell to 53.3-down from 56.6 in February and below its preliminary reading of 55.5. The drop was sharpest among middle- and higher-income households with stock holdings, who faced volatility in financial markets and surging gas prices following the onset of the Iran war on February 28.
The index, benchmarked to 1966 levels where 100 represents peak optimism, remains well below historical norms. It last exceeded 100 in February 2020, just before pandemic lockdowns began.
The current conditions component slipped to 55.8 in March from 56.6 in February and 63.8 a year ago. Meanwhile, the expectations index-which gauges near- and long-term economic prospects-fell to 51.7, down from 56.6 in February.
Year-ahead inflation expectations jumped to 3.8%, the largest one-month increase since April 2025.
Despite the pessimism, underlying economic activity remains resilient. ConnectOne Bank CEO Frank Sorrentino noted that while sentiment is weak, employment and business operations show no meaningful slowdown-a disconnect between perception and reality.
Moody’s Analytics had already raised the odds of a U.S. recession within 12 months to 49% before the Iran conflict intensified.