Trade and Tariffs Worries Drive Decline in Consumer Confidence

Worries about trade and tariffs led to the biggest monthly decline in consumer confidence since August 2021, The Conference Board said Tuesday (Feb. 25).

Reporting findings from its February Consumer Confidence Index, the organization said in a press release that the decline was seen across all age groups and that four of the five components of the index showed greater pessimism.

While consumers’ assessment of present business conditions improved, their views of current labor market conditions, future business conditions, future income and future employment prospects worsened, according to the release.

“References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics,” Stephanie Guichard, senior economist, global indicators at The Conference Board, said in the release. “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”

Bloomberg reported Tuesday that the level of consumer confidence was lower than all estimates given by economists it surveyed.

Reuters reported that the economists it surveyed had forecast a decline in consumer confidence, but not one as large as that reported by The Conference Board.

According to the Tuesday press release, the survey also found that the Expectations Index — which is based on consumers’ short-term outlook for incomes, business and labor market conditions — dropped below the threshold that usually signals an upcoming recession for the first time since June.

Consumers’ average inflation expectations increased from 5.2% in January to 6% in February, likely due to continued inflation, a recent jump in prices of household staples and the expected impact of tariffs, the release said.

Buying plans for cars and big-ticket items like TVs and electronics dropped, while purchasing plans for houses continued to recover because of the recent decline in mortgage rates, per the release.

Consumers’ intentions to purchase services were little changed, though there were upward trends around personal and health care, movies and live entertainment, and downward trends in streaming and travel.

The University of Michigan’s Surveys of Consumers reported Friday (Feb. 21) that it saw consumer sentiment drop 9.8% month over month and 15.9% year over year due to concerns that tariffs will lead to higher prices.

PYMNTS Intelligence found in a survey conducted in early February that among consumers who are knowledgeable about potential import tariffs, 78% said they expect that tariffs will lead to higher prices and 75% said they expect tariffs to cause product shortages.