The Conference Board reported that the Consumer Confidence Index dropped to 98.3 in February, falling short of the Dow Jones forecast of 102.3. This significant decline highlights consumer concerns amid a slowing economy and rising inflation.
Stephanie Guichard, the board’s senior economist for global indicators, noted a decrease in optimism concerning current labor market conditions, future business conditions, and income expectations. Pessimism about employment reached its highest level in ten months.
A contributing factor to this decline is the U.S. administration’s stance on trade. President Donald Trump has announced the imposition of additional tariffs on Canada and Mexico, effective in March, after a delay. Economists warn that these tariffs could aggravate inflation, complicating the Federal Reserve’s decision-making on interest rates.
Consumers’ apprehension is evident, with 12-month inflation expectations climbing to 6%, a notable increase from the previous month’s 5.2%. This rise reflects concerns over persistent inflation and the expected impact of new tariffs on essential goods prices.
Jeffrey Roach, chief U.S. economist at LPL Financial, observed that consumers might adjust their spending habits in anticipation of rising import prices due to tariffs. This behavior is indicative of the uncertainty surrounding future economic conditions.
The market reacted to the report, with stocks briefly declining and Treasury yields continuing to drop, reflecting diminished growth expectations. The 10-year Treasury yield fell by 10 basis points to 4.29%, underlining the market’s concern over economic prospects.
Parallel to the Conference Board’s findings, the University of Michigan’s survey also indicated a decline in consumer sentiment, adding weight to the perception of dwindling consumer confidence. The Expectations Index exhibited a drop of 9.3 points, marking its lowest point since June 2024, aligning with recessionary levels.
Despite these concerns, some aspects of the current economic landscape remain positive. About 19.6% of consumers described business conditions as ‘good,’ marking a slight improvement from January. However, the labor market seems to weaken, with 33.4% of respondents finding jobs ‘plentiful,’ down from 33.9%. Meanwhile, those describing jobs as ‘hard to get’ increased to 16.3% from 14.5% in January.
The notable drop in consumer confidence in February underscores the multifaceted concerns consumers face regarding economic prospects, inflation, and employment opportunities. As trade policies evolve, the impact on consumer sentiment and spending habits will likely continue to unfold.
