The University of Michigan Surveys of Consumers, commonly known as the Michigan Index of Consumer Sentiment (ICS), is one of the most closely watched barometers of American economic psychology. Launched in the late 1940s by economist George Katona, the survey has been conducted continuously for over seven decades, making it among the longest-running measures of consumer confidence in the world. Each month, researchers interview a nationally representative sample of approximately 1000 U.S. individuals, asking about their view of their own financial situation, as well as their opinion on the general economy over the near and long term. From these responses, the Survey Research Center at the University of Michigan constructs the ICS on a scale that benchmarks 1966 survey readings at 100.
When consumers believe prices will rise sharply, they tend to demand higher wages and pull forward purchases, behaviors that can themselves become self-fulfilling and embed inflation into the broader economy. The Michigan inflation expectations series has consequently earned a prominent place in monetary policy deliberations, academic research, and financial market analysis.
The U.S.–Israeli military campaign against Iran, which commenced on February 28, 2026, triggered an immediate and severe dislocation in global energy markets. Iran retaliated by targeting Gulf infrastructure and restricting navigation through the Strait of Hormuz—a chokepoint through which roughly one-fifth of the world’s daily oil and liquified natural gas (LNG) supply transit. Brent crude, which had been trading near $72 per barrel on the eve of the conflict, surged to nearly $120 at its peak, one of the largest single-month oil price jumps on record. By late April, Brent remained above $105 per barrel, and the national average for U.S. gasoline had risen to more than $4 per gallon—up over $1 from pre-war levels.
This energy price shock feeds into the Consumer Price Index (CPI) through multiple, reinforcing channels Rising diesel prices, which exceeded $5.60 per gallon in March, raise transportation costs across the supply chain, eventually lifting the prices of groceries, manufactured goods, and virtually any item that moves by truck or rail. Elevated natural gas prices, constrained by the Gulf conflict, feed into utility bills and industrial input costs. Fertilizer, which is manufactured from natural gas, has faced supply disruptions that threaten to raise food prices with a lag of several months. The International Energy Agency has projected that global natural gas supplies will remain tight for at least two years because of the conflict.
These dynamics are vividly reflected in the April 2026 Michigan survey. The interview period—February 17 through March 23—straddled the outbreak of hostilities, capturing the initial consumer response to the conflict. Figure 1 shows the recent history of the ICS, with callouts of the last three datapoints that capture the conflict. The index was 56.6 at the outbreak of the conflict. After the announcement of a ceasefire, a preliminary print of the March ICS (published April 10) saw a drop to 47.6. A partial recovery was observed after a two-week ceasefire announcement and a modest softening of gasoline prices, confirming that energy costs are a material transmission mechanism linking the conflict to consumer psychology. This modest recovery is evidenced by the increase to the final March ICS level published April 24 at 53.3.
Figure 1-Time series of recent history of Index of Consumer Sentiment (ICS)
Martingale Solution Group’s Michigan Index of Consumer Sentiment Forecast is a data subscription service available to provide community banks and credit unions a data-driven edge in business planning. The forecast is driven by machine learning informed by behavioral economics. Knowing the most likely trajectory of the ICS over the next two years will facilitate design and deployment of deposit and loan products. Contact Martingale Solution Group for a consultation.
