Inflation and Tariff Anxieties Spur Consumers to ‘Pull Forward’ Their Spending

Consumers are weighed down by concerns about tariffs and the state of their own financial conditions — and they’re anything but confident.

As they eye the so-far-unknown impact of tariffs, they seem, still, willing to spend, but that spending’s a “pull forward” before things get even more expensive.

The latest data from The Conference Board on consumer confidence, released Tuesday (March 25) slipped for the fourth straight month as reported for March.

The Expectations Index, which measures consumers’ short-term outlook for income, business and labor market conditions, plunged by 9.6 points to 65.2, the lowest level in 12 years.

Much will be made of the fact that the “future” outlook is below the 80-point level that usually correlates with a recession.

The lack of confidence was evident across all income levels, said The Conference Board, and “consumers’ optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” per a statement from Stephanie Guichard, senior economist, global indicators at the Board.

By demographics, things were a bit mixed. The decline in confidence was driven by consumers over 55 years old, with a smaller drop among those aged 35 to 55. In contrast, confidence among consumers under 35 increased slightly due to improved assessments of present conditions. The downturn was broad-based across income groups, except for households earning more than $125,000 annually.

Anticipating Higher Inflation

Rising inflation expectations further contributed to consumer unease, with average 12-month inflation expectations increasing from 5.8% in February to 6.2% in March, driven largely by concerns over rising household staple prices and tariffs.

The share of consumers expecting a recession over the next 12 months remained elevated at a nine-month high. Additionally, 54.6% of respondents anticipated higher interest rates over the next year, up from 52.6% in February, while those expecting lower rates declined to 22.4%.

Spending Plans

Purchasing plans for homes and cars declined on a six-month moving average basis, yet intentions to buy other big-ticket items, including appliances and electronics, increased, possibly due to concerns over potential price hikes from tariffs. And there’s a bit of mix shift in terms of discretionary spending. While overall spending on services remained stable, consumer priorities shifted, with fewer planning expenditures on entertainment and sports, and more looking to spend on outdoor activities and travel — again, the idea here is that households would “pull forward” spending while the purchasing power of the dollar is, arguably, higher now than it might be in the short term.

As PYMNTS Intelligence has detailed over the last several months, there’s been a movement by consumers to stretch out their payments over time, as a way to budget and conserve cash flow. We’ve noted that for a sizable segment of the population, pay-later plans are a tool for managing day-to-day expenses. Among those living paycheck to paycheck, 75% have turned to these plans within the past year. Even consumers earning more than $100,000 annually are turning to installment plans.

But regardless of the spending mechanisms, if consumers scramble to spend now before the clouds gather even more fully on the macro front, merchants will have less demand moving forward, and it becomes harder to gauge what they need to keep in stock, and when. To move inventory, markdowns may be in the offing.

Overall, March’s data suggests mounting consumer anxiety about the economy and labor market, with inflation and policy uncertainty weighing heavily on sentiment. While some consumers maintain spending intentions, the sharp drop in expectations underscores growing concerns about future economic conditions.