Americans Lose Confidence in the Economy as Uncertainty and Inflation Weigh on Sentiment

Consumer sentiment took another hit in March as economic uncertainty and rising prices lowered optimism. The Conference Board’s latest Consumer Confidence Index reading came in at 92.9, a steep decline from February’s 100.1 and the lowest level in over four years.

The Expectations Index, which gauges short-term outlooks on income, business conditions, and the labor market, dropped to 65.2 from 72.9. Remaining below the 80-point threshold for the second consecutive month, this metric is often considered a recession warning. It marked a 12-year low, highlighting growing consumer anxiety about the future.

Financial Concerns Drive Sentiment Downward

One of the biggest factors weighing on consumer confidence is a deteriorating outlook on personal finances. March’s survey showed expectations for individual financial situations at their lowest point in over two years.

"One of the most significant developments that we have seen was a decline in financial situation expectations from consumers," said Yelena Shulyatyeva, senior U.S. economist at the Conference Board. "This suggests that all this uncertainty around the economic outlook is really starting to weigh on consumers' assessment of how they will fare going forward."

Consumer expectations for inflation rose to 6.2% in March, up from 5.8% in February, indicating growing concerns about the purchasing power of wages. For the first time since 2023, consumer optimism about the stock market also turned negative, with only 37.4% expecting stocks to rise over the next year.

Job Security and Income Outlook Worsen

While the assessment of current labor market conditions showed some improvement, the outlook for future earnings and job stability took a hit. The percentage of consumers expecting a lower income in the next 12 months climbed to 15.5% from 12.8% in February, the highest level since November 2022.

"This data suggests that consumers lack confidence in their job security such that they can ask for higher wages," Jefferies U.S. economist Tom Simons noted. "The direction of travel in this indicator is concerning, but the levels aren't quite at thresholds that we expect would trigger big shifts in spending behavior."

Will Consumer Sentiment Impact Economic Growth?

Despite growing concerns about consumer confidence, Federal Reserve Chair Jerome Powell has questioned the extent to which negative sentiment will impact actual spending.

"The relationship between survey data and actual economic activity hasn’t been very tight," Powell said on March 19. "There have been plenty of times where people are saying very downbeat things about the economy and then going out and buying a new car. But we don’t know that that will be the case here. We will be watching very carefully for signs of weakness in the real data."

Looking Ahead

While consumer confidence has taken a hit, economists remain divided on whether this signals an impending slowdown or just a temporary dip in sentiment. Some, like Morgan Stanley’s chief global economist, argue that recession fears may be "overdone," citing the rebound in February retail sales after a January decline. However, with inflation still a concern and uncertainty surrounding President Trump’s policies, consumers remain wary about what lies ahead for the U.S. economy.