Americans are increasingly anxious about their financial prospects, with a closely watched gauge of consumer confidence slumping to a 12-year low amid growing concerns about tariffs and inflation.
The Conference Board said Tuesday that its consumer confidence index fell 7.2 points in March to 92.9, the fourth straight monthly decline and its lowest level since January of 2021. The reading was short of analysts expectations for a reading of 94.5, according to a survey by FactSet.
The consumer confidence index measures both Americans’ assessment of current economic conditions and their outlook for the next six months. The business group found that the measure of Americans’ short-term expectations for income, business and the job market fell 9.6 points to 65.2. That’s the lowest reading in 12 years and well below the threshold of 80, which the Conference Board says can signal a potential recession in the near future.
The proportion of U.S. consumers anticipating a recession remains at a nine-month high, the board reported.
“Consumer confidence has come under a microscope in recent months as investors worry about retail sales and consumer spending — the engine of the U.S. economy,” Bret Kenwell, U.S. investment analyst at eToro, said in an email. “If consumer confidence continues to sag, it stands to reason that consumer spending, which accounts for roughly two-thirds of U.S. GDP, could also come under pressure.”
Consumer optimism has “largely vanished”
“Consumers’ optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” Stephanie Guichard, senior economist at The Conference Board, said in a statement.
“Like the Michigan survey results, this index says that consumers are rattled,” added Carl Weinburg, chief economist at High Frequency Economics, referring to the University of Michigan’s Survey of Consumers, which earlier this month showed that consumer sentiment had fallen to a two-year low. “Their current situation is not so bad, but a growing do not feel so good about the future,” he added.
The Trump administration has largely played down the souring mood among Americans, saying it doesn’t necessarily reflect what’s happening in the actual economy. This argument is similar to what officials in former President Biden’s administration said as high inflation dented consumer confidence without undermining growth.
“I just don’t think that there’s been a very strong correlation between the confidence data and actual consumer spending in recent years,” Stephen Miran, chair of the White House Council of Economic Advisers, told CNBC on Tuesday. “You go out in the street, people are going about their lives, you know, they’re getting their paychecks, they’re spending their paychecks, the economy is marching on ahead.”
Yet some of the nation’s biggest retailers, who have noted a shift in consumer behavior, are telling a different story.
Walmart and others lower profit forecasts
Walmart has thrived with Americans trying to offset higher prices by seeking bargains. Late last month, however, the nation’s largest retailer slashed its profit forecast for this year. Its sales outlook was also conservative and the company does not include the potential impact of tariffs in its expectations for 2025.
Target’s sales and profit slipped during the crucial holiday quarter, and the company predicted that there would be “meaningful pressure” on its profits to start the year in part because of tariffs on Mexico, Canada and China.
Macy’s, Best Buy, Abercrombie & Fitch, Dollar General and others also have grown cautious about their expectations for 2025, with many citing “economic uncertainty.”
Home and car sales decline
The Conference Board’s survey showed that demand for both homes and cars has waned. However, in somewhat of a surprise given respondents’ anxiety about the future, intentions to buy big-ticket items like appliances increased in March. The group said that could reflect a desire to buy before U.S. tariffs kick in, leading to price increases.
While inflation has retreated from the highs during the post-pandemic rebound, it has remained above the Federal Reserve’s 2% annual target. It is also important to note that while inflation isn’t at the 9% high we saw in summer 2022, prices are still rising, just at a slower pace. Consumers have seen cumulative price increases above 20% since the inflation crisis began — higher than their income.
“Until there’s more certainty on the tariff and macro front, sentiment and confidence remain vulnerable,” eToro’s Kenwell said.
Consumers had appeared increasingly confident heading into the year-end holidays and spent generously. One month later, however, in January, U.S. retail sales fell sharply, though cold weather shared some of the blame.
“Consumers are spooked by headlines about higher tariffs and trade war, DOGE cuts and the stock market sell-off,” Bill Adams, chief economist for Comerica Bank, said in a research note. “When people fear for their jobs, they will cut back on discretionary spending on vacations and going out, and delay big purchases like new houses, cars, or appliances,” he added.
Adams predicts a weakening in discretionary consumer spending in the near-term, but sees a potential break in the clouds further ahead if, perhaps in 2026, tariff talk is replaced by tax cuts.
“If the public conversation turns from spending cuts to tax cut happy talk, consumer sentiment could rebound. But in the meantime, the economy is likely to slow and underperform its growth in 2023 and 2024,” he said.
