Automakers face a troubling customer trend

A month of war and rising gas prices has taken a toll on consumer confidence in the U.S., leading to a decline that is consistent across age groups, income levels, and political party affiliation, according to the latest University of Michigan Survey of Consumers.

Not only are Americans feeling worse about the current economy, but their expectations for next year are also declining at an alarming rate.

Economists are concerned that these short-term shocks will have long-term implications, as "these developments will complicate Fed policy decisions," according to study author Joanne Hsu.

And now we have no idea just how "short-term" these shocks will be, as the fragile ceasefire reached five weeks into the Iran War has already fallen apart less than a week after it was announced.

As of April 12, the average price of a gallon of regular unleaded is $4.125, well ahead of $3.196 a year ago and even $3.598 just a month ago, according to AAA.

According to Morgan Stanley, every $1-per-gallon increase in gas prices results in a $450-per-year increase in fuel costs for gas-powered vehicles, assuming 27 mpg and 12,000 miles driven per year, increasing consumer anxiety.

Consumer sentiment drops 11% in April as Iran War weighs on economy

Consumer sentiment fell about 11% in April, according to the latest University of Michigan Survey of Consumers, extending a steep decline that has worsened since the start of the Iran War.

The declines were consistent across demographics, and consumer sentiment is now about 9% lower than a year ago. Expectations for business conditions a year from now fell about 20% and are now 6% below last April. Personal finance assessments fell 11% as consumers felt the pressure from higher prices and weaker asset values.

One of the big losers from the prolonged conflict and the falling consumer sentiment is the U.S. auto industry.

Buying conditions for durables and vehicles worsened due to high prices, with open-ended survey comments indicating that many consumers "blame the Iran conflict for unfavorable changes to the economy."

“Escalating conflict in the Middle East is increasing risk across the global auto supply chain. Tensions around the Strait of Hormuz have heightened energy price volatility and raised concerns about shipping disruptions in oil and aluminum, among other upstream raw materials,” Morgan Stanley analyst Andrew Percoco said in a recent note.

Year-ahead inflation expectations jumped to 4.8% in April from 3.8% in March. The current inflation reading remains well above the 2.3% to 3.0% the survey recorded in the two years before the pandemic.

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Long-term inflation readings rose to 3.4% in April, the highest since November 2025.

Consumer sentiment fell nearly 6% in March to its lowest level since December 2025. Perhaps underscoring just how unpopular this war is, the declines were seen across age and political party, noted Silver Bulletin.

Middle- and higher-income consumers, “buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment,” according to the March University of Michigan Survey of Consumers.

American card usage to pay for housing has increased since the start of Iran war

Americans are relying on their credit and debit cards to pay for things more since the war started, according to the latest Bank of America data.

Total card spending jumped 4.7% year over year in the week ending March 28.

Unsurprisingly, the gains were led by gas spending, which increased more than 20% year over year. Also, perhaps unsurprisingly, the second-largest increase was in online shopping, which rose by more than 11% year over year.

Excluding gas spending, card usage was steady at 3.7%.

Americans are also using their cards more to pay for lodging, by about 2.77% on average, compared with a year ago. Coupled with lower department-store spending, which is trending lower, and furniture and home improvement spending, which is declining, it seems some Americans are tightening their belts amid the financial impacts and economic uncertainty from the war.

Another surprising nugget from the data is that higher-income households are relying more on card spending than households in other income brackets.

Related: U.S. jobs rebound in March, but we aren't out of the woods yet