For months, lower-income Americans were the ones feeling squeezed. That's starting to change.

What the Final Reading Shows

The University of Michigan's final March sentiment index landed at 53.3 on Friday — below the preliminary estimate of 55.5, below the 54.0 forecast, and below February's 56.6. About two-thirds of the survey's responses were collected after the Iran war began on February 28.

The short-term economic outlook fell 14%. Expectations for personal finances over the next year dropped 10%. Survey director Joanne Hsu noted that any gains from before the conflict "were lost in the weeks thereafter."

Inflation expectations are the number that really moved. Year-ahead expectations jumped from 3.4% to 3.8% — the largest single-month increase in nearly a year. That matters because the Fed closely watches whether consumers expect prices to stay elevated. When inflation expectations rise, they tend to become self-fulfilling.

The New Wrinkle

For most of this cycle, higher-income consumers and stockholders have remained confident while lower-income households struggled. That split is narrowing.

The final March reading showed middle- and upper-income consumers experiencing the steepest sentiment drops — hit by both rising gas prices and stock market volatility. Bankrate analyst Ted Rossman put it plainly: "If this situation is going to squeeze even people at the upper part of the K, that ultimately could be recessionary."

Carnival Cruise Line just reported record bookings, and travel spending remains elevated — for now. But the direction of the data is pointing the wrong way.

The One Silver Lining

Survey director Hsu noted that the declines in short-term expectations were much steeper than in long-term ones. That suggests consumers believe the Iran conflict will be temporary, not a permanent economic shift. If that's right, sentiment could bounce when the conflict settles.

If it's wrong, April's reading will be worse.