Even wealthy Americans are souring on the economy as gas prices spike and stocks fall

Key Points:

• Consumer sentiment in the US declined 6% in March to 53.3, the lowest since December, driven by concerns over the ongoing war with Iran and its impact on markets and energy prices.
• The conflict has caused global energy prices to rise, leading to volatile stock markets and increased inflation expectations for the coming year, which rose to 3.8% from 3.4% in February.
• Despite rising short-term inflation fears, long-term inflation expectations slightly decreased to 3.2%, suggesting consumers do not anticipate sustained inflation from the conflict, which is a positive sign for Federal Reserve policymakers.
• Consumer spending has remained resilient despite falling sentiment, supported by a strong labor market with low unemployment claims and wage growth outpacing inflation, though recent retail sales have weakened slightly.
• If the Iran conflict persists, higher energy prices and market volatility could trigger a recession by reducing consumer spending and causing a broader economic downturn, especially if layoffs increase and job availability declines.