Since the beginning of the year, consumer confidence has seriously dipped, largely due to prevailing uncertainty. This sentiment is echoed by Ryan Cummings, chief of staff at the Stanford Institute for Economic Policy Research and a former economist with the White House Council of Economic Advisers. He likens fear’s impact on the mind to uncertainty’s effect on the economy, noting how President Donald Trump’s tariff strategies, cuts to the federal workforce, and a volatile stock market are starting to take their toll, a trend consumers are now detecting.
Cummings highlights how unsettling it is for people to feel unsure of the economic future, questioning whether growth will continue or a recession is looming. The numbers back this up: March’s consumer confidence readings hit some of the lowest points on record. On Tuesday, the Conference Board reported a drop in its Consumer Confidence Index to 92.9 in March, from 98.3 in February and even lower compared to 104.1 in January.
When survey participants were asked what influences their economic views, many pointed at the current administration, inflation, trade policy concerns, and general economic uncertainty. The University of Michigan’s consumer sentiment index for March mirrors this decline, sitting at 57.9—levels reminiscent of past economic challenges like the stagflation of the 1980s and the Great Recession, though still above the all-time low of 50 set in June 2022 during peak inflation.
Survey participants, regardless of political leaning, mentioned how economic policy uncertainties are complicating future planning. Interestingly, Republican expectations dropped 10%, while those of independents and Democrats fell by 12% and 24% respectively. Cummings observes that this reflects Democrats’ dissatisfaction and hints at Republicans experiencing some buyer’s remorse.
Now, what about the state of the economy? By many measures, it remains robust—inflation has slowed, unemployment is steady, and growth has been consistently positive. Yet, there are signals of potential trouble ahead. Consumer spending has decreased slightly, dipping by 0.2% from December to January. This marked the first downturn in nearly two years, though whether this is a temporary fluctuation or a persistent trend remains to be seen, with more data due soon.
Projections for growth aren’t too optimistic either. The Atlanta Federal Reserve’s forecasting tool suggests negative growth for the first quarter of 2025. If this holds when GDP data is officially reported at the end of April, it would mark the first decline since early 2022 when inflation was peaking. While inflation growth has decelerated, prices have stayed high. As of February, the annual inflation rate was 2.8%, down significantly from the 9% high in June 2022, although prices for essentials like food and rent have soared since 2019, making them constant reminders of governmental effectiveness, as Cummings argues.
Furthermore, unemployment has seen a slight uptick, reaching 4.1% in February. Trump’s cuts to federal jobs have not yet fully impacted these numbers, but unemployment remains steady around 4%. Meanwhile, stock markets have experienced volatility, with the S&P 500 plummeting after Trump’s inauguration highs, then rebounding recently as prospects of softened tariff policies emerged.
Is this dip in consumer sentiment foreshadowing a recession? The Consumer Confidence Survey’s Expectations Index tumbled to its lowest in over a decade, raising concerns. The diminished sentiment, coupled with alarming data indicators, has brought the term “recession” back into discussion, with little done by the Trump administration to dissipate these fears. In a recent interview, Trump did not fully dismiss the possibility of a recession, describing the current state as a “transition period.”
This concern is shared by economists, who fear that persisting low consumer sentiment might herald future spending issues. On March 7, the American Bankers Association Economic Advisory Committee highlighted the prolonged risk of Trump’s tariffs possibly triggering a recession. Former Treasury Secretary Larry Summers even predicted a near-equal chance of recession by 2025 due to current policies.
The impact of tariffs continues to loom, with additional measures set for April 2, coined “liberation day” by Trump. In a mixed outlook, the UCLA Anderson Forecast for March casts a “Recession Watch,” a stance fueled by the potential enactment of Trump’s trade, immigration, and downsizing agendas.
Conversely, while the Federal Reserve has adjusted its growth and inflation forecasts for 2025, this isn’t necessarily a sign of guaranteed recession. Fed Chair Jerome Powell has noted the uptick in recession risks but maintains it’s not excessively high. According to Cummings, people are beginning to pull back, making it possible that a recession could already be simmering without formal acknowledgment. He suggests consumer sentiment is running parallel to recessionary trough levels, leaving the crucial question of whether consumers will sustain their current spending or continue to contract.
Keep an eye out for the next consumer sentiment update from the University of Michigan, set to be released on Friday.
