Only 4% of Consumers Think Ukraine War Will Have No Inflationary Impact

Six in 10 U.S. consumers think the war in Ukraine will cause inflation to worsen “significantly” in the next several months, the Conference Board reported Tuesday.

Analytics company Toluna did a “special poll” for the board in March as part of its monthly consumer confidence survey (see 2203290024), finding 28% of the 5,000 consumers it canvassed through March 23 said they expect the Ukraine conflict will cause prices to rise “moderately.” Only 4% said they expect no impact from Russia’s invasion, said the board.

Consumers said they expect the overall impact of the war in Ukraine to be “negative” and “wide reaching,” with rising energy prices, especially prices at the pump, likely to be the hardest hit, said the board: “With gas prices hovering well above $4 a gallon, energy prices are likely to remain a top concern among consumers.”

Overall consumer confidence rebounded slightly in March after back-to-back declines in January and February, and “continues to be supported by strong employment growth,” said the board. Consumer confidence “has been holding up remarkably well despite surging geopolitical conflict,” it said. But expectations for inflation over the next 12 months reached 7.9% in March, an all-time high, “and are likely to rise further in the coming months,” it said.

The board is forecasting that the impact of rising prices, especially for less affluent consumers, “is likely to curb spending in 2022,” it said. “These consumers will have fewer discretionary dollars to spend on dining out, entertainment outside of the home, travel, and vacations,” said the board. “In-person services industries trying to bounce back from the pandemic may remain challenged, though to a lesser degree than during the worst of the COVID-19 crisis.”

The board expects "headwinds" from higher inflation and the war in Ukraine “to persist in the short term,” it said. “These may well dampen confidence and cool spending and economic growth in the months ahead.” The board’s March survey found that TV-buying intentions for the next six months held steady compared with February, but that purchasing plans for big-ticket items “have softened over the past few months” along with fears about rising interest rates, it said.