Consumer Sentiment Plummets Amid Record Partisan Divide
Consumer sentiment in the United States took a significant hit in March, according to the University of Michigan’s latest consumer sentiment survey. The headline index dropped sharply to 57.9, down from 64.7 in February, marking its lowest point since November 2022. This decline was observed across all income levels and age groups, but the most striking aspect of the survey was the unprecedented partisan divide in economic expectations. Democrats’ expectations for the economy hit an all-time low, while Republicans remained remarkably optimistic. This contrast highlights the deepening political polarization in the country and its impact on economic perceptions.
Democrats’ Economic Sentiment Hits Historic Lows
The expectations index for Democrats plummeted to 28.2, a level lower than during the 2008 financial crisis, the COVID-19 pandemic, or even Donald Trump’s first term. This dramatic decline reflects a growing sense of pessimism among Democrats about the economy’s future. Historically, consumer sentiment has tended to align with partisan control of the White House. For instance, Republican confidence surged after Trump’s 2016 election, while Democratic sentiment spiked following Joe Biden’s 2020 victory. However, the current divide surpasses even the 64.6-point gap recorded in early 2017, when Republican confidence soared after Trump’s inauguration.
Republicans Remain Optimistic Amid Growing Divide
In stark contrast to Democrats, Republican expectations remained high at 95.7, marking a 67.5-point gap between the two groups. This is the largest partisan divide ever recorded in the survey. Independent voters, meanwhile, saw their expectations decline to 51.8, bringing them closer to Democrats than Republicans for the first time in years. The findings underscore the stark contrast in economic perceptions under President Trump’s second term. Republicans remain broadly optimistic, driven by expectations of lower taxes, deregulation, and business-friendly policies. Democrats, on the other hand, have grown increasingly pessimistic, citing concerns over inflation, trade policy, and broader economic uncertainty.
Inflation Expectations Reverse Along Party Lines
For most of President Biden’s term, Republicans consistently expected higher inflation than Democrats, aligning with their concerns about government spending and Federal Reserve policy. However, this trend has now reversed dramatically. Democrats now expect inflation to rise by 6.5 percent over the next year, a sharp increase from prior months. Republicans, by contrast, expect inflation to be just 0.1 percent, signaling a near-complete collapse in their concerns about rising prices. Independents expect inflation to rise by 4.4 percent, positioning them closer to Democrats.
This partisan inversion in inflation expectations is the sharpest in recent history. From 2021 to 2023, Republicans routinely expressed higher inflation expectations than Democrats. Now, the spread between the two groups has swung to -6.4 percentage points (Republicans minus Democrats), the largest negative gap on record. The decline in consumer sentiment coincides with rising inflation expectations across all political groups, with consumers now expecting prices to rise by 4.9 percent over the next year, up from 4.3 percent in February.
Policy Uncertainty and Market Volatility
The survey also revealed growing unease about government policy, trade, and financial markets. Nearly 48 percent of respondents spontaneously mentioned tariffs as a source of concern, reflecting uncertainty over Trump’s newly announced 25 percent tariffs on imports from Mexico and Canada, along with an additional 10 percent on Chinese goods. Markets have reflected some of this uncertainty, with the S&P 500 rebounding on Friday after a volatile trading week, while the U.S. dollar weakened amid speculation about future Federal Reserve policy.
Consumer confidence has now declined for three consecutive months, with overall sentiment down 22 percent since December. If spending patterns follow sentiment trends, the economy could face weaker consumer demand in the months ahead—even if politics is a major driver of the decline. The findings underscore the dramatic contrast in economic perceptions under President Trump’s second term and highlight the challenges of navigating an economy increasingly shaped by partisan divides.