Consumer sentiment in March unexpectedly jumped to a 14-year high after tax cuts boosted disposable incomes, while new tariffs raised inflation expectations and dimmed the outlook, a University of Michigan survey showed Friday.
The advance in confidence should help underpin consumer spending, the biggest part of the U.S. economy, after a report earlier this week showed a sluggish start to the year for retail sales. A tightening labor market, rising home prices and tax cuts enacted in December are supporting optimism among Americans.
At the same time, the direction of sentiment was split. Respondents in the bottom third of household income posted a 15.7-point gain in the index, while the top third recorded a 7.3-point decline. In addition, President Donald Trump’s tariffs on imported steel and aluminum earned unfavorable mentions in the survey at roughly the same rate as favorable mentions of the tax cuts.
Tariffs dimmed respondents’ prospects for the economy and helped raise inflation expectations, according to the report. Also, respondents’ expected gains in incomes in the year ahead fell to 1.8 percent from 2.2 percent. All of the decline in expected income gains came among respondents in the top third of incomes.
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