Americans Feel Worse About the Economy Than Ever Before

A fuel station in Apache Junction, Arizona, this week
Eduardo Barraza/ZUMA Press Wire
By Yuval Rosenberg and Michael Rainey

Friday brought some grim economic news, as the government reported that inflation saw the largest one-month jump since the pandemic and reached its highest level since May 2024, thanks largely to the surge in gas prices caused by the Iran war. Amid those price spikes, consumer sentiment plunged to the lowest level ever recorded in the 74-year history of a University of Michigan survey. Here's your evening update.

Inflation Jumps to Highest Level in Nearly Two Years

Surging energy prices triggered by the war with Iran pushed annual inflation in March to its highest level in nearly two years, the U.S. Bureau of Labor Statistics reported Friday.

The Consumer Price Index rose 0.9% on a monthly basis - the biggest monthly jump since 2022 - and 3.3% on an annual basis, with energy costs leading the way. Gasoline prices spiked 21.2% and fuel oil prices rose 31% from February to March as the closure of the Strait of Hormuz and worries about the destruction of energy infrastructure throughout the Persian Gulf sent global oil prices sharply higher.

Core inflation, which ignores volatile food and fuel prices to provide a better sense of the underlying trend, was more muted, though still above the Federal Reserve's 2% target rate. Core CPI rose 0.2 on a monthly basis and 2.6% on an annual basis, better than expected. Some categories of goods seeing price increases, such as airline tickets, are closely connected to the energy market, with jet fuel prices more than doubling since the start of the war.

White House plays up the positive: The White House tried to put a positive spin on the data, with President Trump's top economic adviser Kevin Hassett telling Fox Business News that egg prices are down 44% over the last year.

At the same time, White House spokesperson Kush Desai seemed to recognize that the war in the Middle East is causing economic pain for the American people. "President Trump has always been clear about short-term disruptions as a result of Operation Epic Fury, disruptions that the Administration has been diligently working to mitigate," he wrote on social media. "Although gas and energy prices are seeing volatility, prices of eggs, beef, prescription drugs, dairy, and other household essentials are falling or remain stable thanks to President Trump's policies."

Democratic Sen. Elizabeth Warren pointed the finger directly at Trump, saying that "every family struggling to fill their gas tank or buy groceries knows exactly who is responsible."

What the analysts are saying: While the relatively tame core inflation numbers suggest that the overall economy has largely escaped damage from the Iran war so far, even though it's hitting consumers at the gas pump, analysts warn that it is only a matter of time before soaring energy costs ripple through other sectors, pushing up prices for all kinds of goods.

RSM Chief Economist Joseph Brusuelas said Friday that the energy shock will likely play out in two waves. "The first was in March, which showed up inside the energy complex, and the second will follow in April and beyond in the broader transportation, travel, food and service categories," he wrote in a research note.

"The size of the energy shock is such that businesses and households should not anticipate any near-term relief," Brusuelas added. "The price shock will be with all of us for the rest of the year."

Although the size and duration of the coming inflationary wave remain to be seen, most analysts agree that the April numbers will be worse. "It's painful in the near term," said Michael Pearce, chief U.S. economist at Oxford Economics, per the Associated Press, adding, "It's going to get more painful in April."

Still, Pearce said he doubts that the inflationary wave will last. "I think the conditions are much more like a short, sharp shock than what we saw in 2022," he said, referring to the time when Russia's invasion of Ukraine caused a spike in energy prices.

Olu Sonola, head of U.S. economics at Fitch Ratings, emphasized that the price increases will be widespread and hard to avoid. "You are going to see those surcharges start to appear in bills, and people pay attention to those," Sonola said, per Bloomberg. "It's not only airfares, it's not only luxury travel or this or that. It's about the things that you buy on a day-to-day basis really moving higher."

As Inflation Surges, Consumer Sentiment Falls to 74-Year Low

Americans feel worse about the economy than they have in more than 70 years.

The University of Michigan said Friday that its measure of consumer sentiment sank about 11% this month to reach the lowest level recorded since the school began its surveys in 1952.

The Michigan index of consumer sentiment fell from 53.3 last month to 47.6, dropping below the previous low of 50 from June 2022, when inflation spiked to levels not seen in decades.

Sentiment is down 9% from where it was a year ago. "Demographic groups across age, income and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month's fall," Joanne Hsu, the director of the Michigan survey, said in a statement accompanying the preliminary results.

Americans' perception of current economic conditions, a related measure in the survey, dropped more than 10% compared with March and more than 16% from where it was a year ago. Expectations for business conditions a year from now dropped by 20% and now stand 6% below last April. Expectations for inflation a year from now also jumped, from 3.8% in March to 4.8% this month, the largest one-month increase since April 2025.

"Assessments of personal finances declined about 11%, with consumers expressing a substantial increase in concerns over high prices and weaker asset values," Hsu said. She added that comments from consumers show that many blame the Iran war for worsening the economy, though nearly all of the survey interviews were conducted before a two-week ceasefire was announced a few days ago.

Economist Claudia Sahm noted in a post on X that negative views of the government's economic policy - the survey asks specifically about "steps taken to fight inflation or unemployment" - have also risen to multi-decade highs. "In early April, over 70% of Americans said the government is doing a poor job on economic policy," Sahm wrote. "Tariffs last year and gas prices now are deeply unpopular."

The bottom line:

The bottom line: The final report for April may see sentiment improve somewhat as the ceasefire raises hopes that gas prices will fall, but the war in Iran isn't resolved just yet and the supply disruptions it caused may take time to repair.

Americans' View of Their Taxes Near the Most Negative Levels in Decades: Gallup

With tax day for 2026 just five days away, Gallup pollsters find that nearly six in 10 Americans say their taxes are too high - the fourth straight year that the share of people who think they pay too much has hovered at or near 60%. Those results don't vary much by income level, though they do differ somewhat based on political affiliation, with 64% of independents, 60% of Republicans and 49% of Democrats calling their taxes too high. The Republican share has dropped from 71% in 2023, while the Democratic result has risen from 41% that year.

Gallup says the share of people who now call their taxes too high is well above the roughly 50% average seen in its surveys in the early 2000s, following President George W. Bush's 2001 tax cuts. But it is still lower than the levels seen in surveys from the 1970s, 1980s and 1990s, when the percentage of people who said their taxes were too high regularly topped 60%.

Gallup's Lydia Saad notes that sentiment around tax levels shifted significantly after those Bush-era tax cuts. "Between 2001 and 2003, spanning the passage of George W. Bush's first tax cut, the percentage saying taxes are too high fell from 65% to 47%, while people's belief that their taxes are fair increased from 51% to 64%," Saad writes. The 2017 tax cuts enacted under President Trump similarly helped push the "too high" complaints in Gallup's polling to recent lows of 45% in 2018 and 2019.

"The positive impact of that legislation on public perceptions of their taxes faded in 2021, as Republicans became more likely to believe their taxes were too high after Joe Biden became president," Saad notes. "As high inflation took hold in 2022 and continued in 2023, dissatisfaction rose further as cumulatively higher prices weighed on consumers."

The tax cuts enacted as part of last summer's One Big Beautiful Bill Act have not translated to a boost in Americans' views of their taxes - at least not yet, based on the Gallup data. In the latest survey, nearly half of Americans, 47%, called their tax burden fair, near the 45% low from 1999, while 49% said it was not fair, close to the 51% high found in 2023.

Gallup's survey was conducted from March 2 to 18 with a random sample of 1,000 adults. The margin of sampling error is ±4 percentage points at the 95% confidence level.

Fiscal News Roundup

Views and Analysis