Amidst growing concerns about high prices and the potential impact of tariffs, consumer confidence in the US economy has plummeted to its lowest level in 12 years. According to data released by The Conference Board, the Consumer Confidence Index fell for the fourth consecutive month, dropping 7.2 points to 92.9 in March.
This decline in consumer confidence is particularly notable, as it marks a significant shift in Americans’ expectations about the economy’s future. The last time consumer confidence was this low, the US was slowly emerging from the Great Recession and the aftershocks of the subprime crisis.
While Americans’ current view of the economy remains historically high at 134.5, it has fallen 10 points since its peak in December. This decline suggests that consumers are becoming increasingly cautious about the economy’s prospects, despite the current strength of the labor market.
The Conference Board’s report highlights several key factors contributing to the decline in consumer confidence. One major concern is the potential impact of tariffs on prices. Consumers are worried that tariffs will drive up prices for essential household items, such as eggs, and are becoming increasingly pessimistic about future business conditions.
Another factor contributing to the decline in consumer confidence is the stock market selloff. Consumers are spooked by headlines about market volatility and are becoming increasingly cautious about their spending habits.
The Conference Board’s report also notes that consumers’ expectations for higher inflation in the next 12 months have increased. This suggests that consumers are becoming increasingly concerned about the potential impact of tariffs and other economic factors on prices.
In terms of demographics, the decline in consumer confidence was most pronounced among Americans older than 55, as well as some between 35- and 55-years old. Consumers under 35, however, voiced a slight increase in confidence, which helped offset older Americans’ views.
The decline in consumer confidence has significant implications for the US economy. As consumers become increasingly cautious about their spending habits, businesses may begin to reduce investment and hiring. This could lead to a slowdown in economic growth, particularly if consumer confidence continues to decline.
In response to the decline in consumer confidence, some economists are calling for policymakers to take action to boost consumer sentiment. Bill Adams, chief economist at Comerica Bank, suggests that a shift in the public conversation from spending cuts to tax cuts could help rebound consumer sentiment.
However, Adams also notes that the economy is likely to slow and underperform its growth in 2023 and 2024. This suggests that the decline in consumer confidence may be a harbinger of a broader economic slowdown.
Overall, the decline in consumer confidence is a significant concern for the US economy. As consumers become increasingly cautious about their spending habits, businesses and policymakers must take action to boost consumer sentiment and prevent a broader economic slowdown.
