U.S. consumer sentiment dropped sharply in April, falling 11% to 50.8 from 57.0 in March, according to the University of Michigan’s latest survey. This marks the fourth consecutive monthly decline and places the index more than 30% below its December 2024 level. The downturn was broad-based and unanimous across all major demographic groups, driven by escalating concerns over a potential recession amid renewed trade tensions. Respondents flagged deteriorating expectations for personal finances, business conditions, inflation, and the labour market. Most notably, the share of consumers expecting unemployment to rise over the next year has more than doubled since November 2024, reaching its highest point since 2009. This sharp decline in labour market confidence is in stark contrast to the stability that supported consumer spending in recent years.
Compounding concerns, year-ahead inflation expectations surged to 6.7%, the highest reading since 1981, while long-run expectations also rose, suggesting that elevated inflation has become increasingly entrenched in consumer outlooks. These macro indicators carry weight for the polyurethane sector, where flexible foam and polyol demand are tightly linked to consumer spending on items like furniture, bedding, and automobiles. For polyol producers, this erosion in confidence threatens to unwind years of steady demand growth, particularly in consumer-driven foam applications like furniture and automotive interiors.
Consumer Caution Filtering Down to Foam Markets
The sharp erosion in consumer sentiment, particularly in spending confidence and employment expectations, has started to impact downstream consumption trends across the U.S. polyol market. Flexible polyurethane foam applications, which account for a significant portion of domestic polyether polyol demand, are especially vulnerable to shifts in discretionary spending. These include furniture, mattresses, and automotive interiors, sectors that typically experience demand contraction during periods of economic uncertainty.
Auto Sector: Tariff-Driven Surge Masks Underlying Concerns
The U.S. auto market's unusual early-2025 sales surge, driven by consumers rushing to avoid impending tariff-related price hikes, has created a deceptive boom. Days' supply of new vehicles plummeted from 91 to 70 between March and April as buyers front-loaded purchases, but this "pull-forward" effect threatens to reverse sharply once tariff-free inventories deplete. Analysts now warn that the 25% tariffs could suppress annual U.S./Canada auto sales by up to 2 million units as higher production costs filter through, compounding existing margin pressures from rising input prices. This poses particular risks for the polyurethane industry, where automotive applications (seating, insulation, interior components) account for nearly 30% of flexible foam demand. Trump’s administration’s April 9 decision to pause these tariffs for 90 days may offer temporary relief, but with inventories already depleted, any demand rebound could be muted.
The sector's vulnerability is amplified by the macroeconomic backdrop: stagnant wage growth and persistently high interest rates may further erode consumer willingness to finance big-ticket purchases. Should auto sales contract as forecast, polyol demand would face immediate pressure, procurement cycles for foam components would lengthen, while orders from chemical processors weaken, and production schedules adjust downward. Crucially, this would hit just as polyurethane suppliers begin normalizing post-pandemic inventory levels, creating a potential oversupply scenario in the polyols market. The current auto sales strength, therefore, may represent not sustainable growth but a temporary spike preceding a demand trough, one that could disproportionately impact speciality chemical producers reliant on automotive foam applications.
Market Outlook: Watching Consumer Signals Closely
The coming weeks will be critical in determining whether current consumer weakness is a short-term correction or the start of a prolonged downturn. Notably, the April University of Michigan reading reflects data collected between March 25 and April 8, just before the partial tariff reversal announced on April 9, which paused certain trade penalties for over 70 countries for a 90-day window. This means that any potential rebound in consumer sentiment stemming from easing trade tensions is not yet reflected in the latest survey results. Should the tariff pause stabilize sentiment and summer inflation data cool faster than expected, polyol demand could find a floor by late Q3, though most converters are not betting on this outcome yet. A sustained drop in consumer confidence, especially if unemployment rises, would keep polyol demand under pressure. Both the furniture and automotive sectors, where purchases depend heavily on household finances and economic outlook, would likely cut orders further.
