Financial anxiety among Americans is on the rise, indicated by a widely monitored consumer confidence index that has plummeted to a 12-year low, fueled by increasing worries over tariffs and inflation.
According to the Conference Board, released on Tuesday, the consumer confidence index decreased by 7.2 points in March to 92.9, marking the fourth consecutive monthly drop and reaching its lowest point since January 2021. This figure fell short of analysts’ expectations, which had projected a reading of 94.5 based on a FactSet survey.
This index gauges Americans’ evaluations of current economic conditions alongside their outlook for the forthcoming six months. The business group found that Americans’ short-term expectations regarding income, business, and the job market fell by 9.6 points to 65.2, the lowest figure in 12 years. This is significantly below the 80-point threshold that the Conference Board associates with a potential upcoming recession.
The percentage of U.S. consumers forecasting a recession remains at a nine-month peak, as reported by the board.
Bret Kenwell, a U.S. investment analyst at eToro, noted in an email, “Consumer confidence has come under scrutiny recently as investors express concerns over retail sales and consumer spending—the main drivers of the U.S. economy. If consumer confidence keeps declining, it is reasonable to assume that consumer spending, which makes up about two-thirds of U.S. GDP, could face pressure.”
Optimism among consumers has “largely disappeared”
Stephanie Guichard, senior economist at The Conference Board, stated, “Consumers’ optimism regarding future income—which had remained robust in recent months—has largely disappeared, signaling that concerns about the economy and labor market are beginning to affect consumers’ perceptions of their personal circumstances.”
Carl Weinburg, chief economist at High Frequency Economics, added, “This index, like the Michigan survey results, indicates that consumers are feeling unsettled. While their current situation isn’t extremely dire, there is a growing sense of unease about the future,” referring to the University of Michigan’s Survey of Consumers, which recently showed consumer sentiment had fallen to a two-year low.
The Trump administration has largely downplayed the negative sentiment among Americans, arguing that it doesn’t necessarily reflect the actual economic situation. This perspective mirrors statements from officials in the Biden administration, who noted that high inflation had affected consumer confidence but not stunted growth.
“I don’t believe there has been a 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. “When you observe individuals in public, they seem to be going about their lives normally, cashing their paychecks, and spending them as the economy continues to progress.”
However, significant retailers across the nation have noted a change in consumer behavior, presenting a different narrative.
Walmart and Others Adjust Profit Projections
Walmart has experienced success as Americans seek bargains to mitigate rising prices. Yet, at the end of last month, the nation’s largest retailer revised its profit forecasts downward for the year. The company’s sales outlook remained cautious, and it did not factor in potential tariff impacts for 2025.
Target’s sales and profits dipped during the crucial holiday season, predicting “meaningful pressure” on profits for the start of the year due to tariffs on imports from Mexico, Canada, and China.
Other companies, such as Macy’s, Best Buy, Abercrombie & Fitch, and Dollar General, have also expressed caution regarding their 2025 expectations, with many referencing “economic uncertainty.”
Declines in Home and Car Sales
The Conference Board’s survey indicated that demand for homes and vehicles has decreased. Surprisingly, amid the respondents’ anxieties about the future, intentions to purchase big-ticket items like appliances rose in March. The group suggested this trend might indicate a desire to buy before potential price hikes from U.S. tariffs take effect.
While inflation has decreased from the highs observed during the post-pandemic recovery, it persists above the Federal Reserve’s annual target of 2%. It is essential to note that although inflation isn’t at the 9% level seen in summer 2022, prices continue to rise, albeit at a slower rate. Consumers have witnessed cumulative price hikes exceeding 20% since the onset of the inflation crisis—outpacing income growth.
“Until there is more clarity surrounding tariffs and broader macroeconomic factors, sentiment and confidence will remain fragile,” Kenwell from eToro stated.
Consumers had appeared increasingly confident leading into the year-end holiday season, engaging in generous spending. However, one month later, in January, U.S. retail sales plummeted sharply, partly attributed to adverse weather conditions.
According to Bill Adams, chief economist for Comerica Bank, “Consumers are unsettled by news regarding increased tariffs, trade wars, DOGE cuts, and stock market downturns. When people fear for their job security, they tend to reduce discretionary spending on vacations and dining out and delay significant purchases of homes, vehicles, or appliances.”
Adams anticipates a decline in discretionary consumer spending in the near term but identifies a potential positive shift if, as early as 2026, discussions about tariffs are replaced with tax cuts.
“If public dialogue transitions from spending cuts to discussions of tax cuts, consumer sentiment could recover. However, until then, the economy is likely to slow down and underperform compared to its growth in 2023 and 2024,” he stated.
