| Key Points: – The consumer expectations index fell to 65.2, its lowest level in 12 years, signaling rising concerns about financial stability and economic conditions. – Inflation expectations jumped to 6.2% in March, with fewer consumers optimistic about the stock market. – Despite declining sentiment, economists and the Federal Reserve remain cautious about whether pessimism will translate into lower spending. |
Americans’ confidence in the economy has fallen to its lowest level in over a decade, reflecting heightened concerns over inflation, financial uncertainty, and the impact of President Donald Trump’s economic policies. The latest consumer confidence index from the Conference Board dropped to 92.9 in March, down from 100.1 in February, marking the lowest reading in more than four years.
More concerning is the expectations index—a measure of consumers’ outlook on income, business conditions, and employment—which plunged to 65.2, its weakest level since 2013. This marks the second consecutive month the index has remained below 80, a level historically associated with an impending recession.
The biggest driver of the decline appears to be worsening personal financial expectations. Consumers are increasingly pessimistic about their future earnings and job security, with financial situation expectations hitting their lowest level in over two years.
Inflation remains a primary concern, with consumer expectations for price increases rising to 6.2% in March from 5.8% in February. This shift suggests that Americans anticipate higher costs for everyday goods and services in the months ahead.
At the same time, consumer optimism about the stock market has deteriorated. For the first time since 2023, more Americans expect stocks to decline rather than rise, with only 37.4% of respondents predicting market gains over the next year. This shift in sentiment could indicate broader concerns about economic volatility and the impact of recent policies on financial markets.
While these fears weigh on economic confidence, the labor market remains a bright spot. Among the five components of consumer confidence measured in the survey, only current job market conditions showed improvement in March. This suggests that while Americans are worried about inflation and market stability, they are not yet seeing widespread job losses.
While consumer sentiment is declining, the critical question remains: Will this pessimism lead to reduced spending and a slowdown in economic growth? So far, Federal Reserve officials and economists are unsure.
Fed Chair Jerome Powell acknowledged the disconnect between consumer surveys and actual economic behavior, noting that while people express concern about the economy, they often continue spending on major purchases like cars and homes. “The relationship between survey data and actual economic activity hasn’t been very tight,” Powell said in a recent press conference.
Economists at Morgan Stanley have also downplayed fears of an imminent recession, arguing that consumer spending remains resilient. While retail sales dipped in January, they rebounded in February, casting doubt on the notion that a major downturn is underway.
If consumer confidence continues to decline, it could eventually translate into lower spending, which would have significant implications for businesses and economic growth. However, for now, the broader economic data suggests that while uncertainty is high, the economy remains relatively stable. The coming months will be crucial in determining whether Americans’ pessimism is justified or if the economy can weather the storm.