US consumer confidence tumbles for the 4th straight month as future expectations hit a 12-year low
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(AP) — U.S. consumer confidence fell for the fourth straight month as Americans’ anxiety about their financial futures declined to a 12-year low amid rising concern overtariffsandinflation.
The Conference Board reported Tuesday that its consumer confidence index fell 7.2 points in March to 92.9. Analysts were expecting a decline to a reading of 94.5, according to a survey by FactSet.
The Conference Board’s report Tuesday said that the measure of Americans’ short-term expectations for income, business and the job market fell 9.6 points to 65.2.
It is the lowest reading in 12 years and well below the threshold of 80, which the Conference Board says can signal a potential recession shortly. However, the proportion of consumers anticipating a recession in the next year held steady at a nine-month high, the board reported.
“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,” said Stephanie Guichard, senior economist at The Conference Board.
The administration of President Donald Trump has largely played down the decline in consumers’ outlook, saying it doesn’t necessarily reflect what’s happening in the actual economy. This argument is similar to what officials in former President Biden’s administration said as high inflation suppressed consumer confidence without undermining growth.
“I just don’t think that there’s been a very strong correlation between the confidence data and actual consumer spending in recent years,” Stepehn Miran, the chairman of the Council of Economic Advisers, told CNBC on Tuesday. “You go out in the street, people are going about their lives, you know, they’re getting their paychecks, they’re spending their paychecks, the economy is marching on ahead.”
The prospect of Trump’s tariffs hampering growth while increasing inflationary pressures has distressed both consumers and businesses.
Walmart turned in another strong year as inflation-weary shoppers flocked to their outlets for deals, but the nation’s largest retailer slashed its profit forecast for this year. Its sales outlook was also mild, potentially a reflection of challenges ahead as consumers pull back on spending and tariffs on China and other countries threaten Walmart’s low-price model.
Target’s sales and profit slipped during the crucial holiday quarter, and the company predicted that there would be “meaningful pressure” on its profits to start the year in part because of tariffs on Mexico, Canada, and China.
Macy’s, Best Buy, Abercrombie & Fitch, and others also have grown cautious about their expectations for 2025, with many citing “economic uncertainty.”
However, Miran said he believes that the countries on which the tariffs are imposed will ultimately pay the taxes, which are usually collected at the ports of entry in the United States. Most economists say the tariffs, primarily paid by importers, would be passed along to consumers and businesses in the form of higher prices.
The board’s survey showed that purchasing plans for both homes and cars declined. However, in somewhat of a surprise given respondents’ anxiety about the future, intentions to buy big-ticket items like appliances increased. The board said that could reflect a desire to buy before the tariffs kick in, leading to price increases.
While inflation has retreated from the highs during the post-pandemic rebound, it has remained above the Federal Reserve’s 2% target. Those still-elevated prices, combined with the announced tariffs on many imported goods, have Americans feeling sour about spending as concerns about the economy mount.
Consumers appeared increasingly confident heading into the end of 2024 and spent generously during the holiday season. However, U.S. retail sales dropped sharply in January, with cold weather taking some of the blame.
Earlier this month, the government reported that Americans modestly stepped up their spending in February after a sharp pullback the previous month.
The board reported Tuesday that consumers’ view of current conditions decreased 3.6 points to 134.5.
The consumer confidence index measures both Americans’ assessment of current economic conditions and their outlook for the next six months.
Consumer spending accounts for about two-thirds of U.S. economic activity and is closely watched by economists for signs about how the American consumer is feeling.
(Reuters) - Recent economic projections from Federal Reserve officials had shades of "Stagflation-lite," in the words of one economist, a sentiment increasingly echoed among other observers of the U.S. economy and central bank wondering if the country's outperformance during the pandemic is about to slide.
So what is stagflation, and why is it suddenly on everyone's mind?
THAT (BAD) 70s SHOW
Stagflation, or a period of both high inflation and high unemployment, hit the U.S. notably in the 1970s, which may have featured the worst U.S. economic leadership since the Great Depression. Fed officials had their data and their framework wrong, and elected officials flailed against inflation with price controls and what now seem quaint public relations efforts, most notoriously the Ford administration's "Whip Inflation Now (WIN)" button campaign.
As economists in recent weeks have begun marking down their estimates of economic growth and marking up estimates of inflation in the face of dramatic economic policy shifts under President Donald Trump, it has sparked debate about whether that could be unfolding again now.
In theory, a weak economy with rising unemployment undercuts inflation, so the two should not coexist. But as with oil price shocks in the 1970s that drove prices higher, the tariff shock anticipated from Trump's trade policies now has the world guessing.
The Trump administration says the tariffs are part of what they bill as a transition for the economy that, coupled with other efforts to deregulate industry and cut taxes, will produce both plentiful jobs and lower inflation.
The hints of stagflation in current forecasts aren't nearly as bad as the 1970s, a decade in a league of its own when a surge in the so-called "misery index" combining the unemployment and inflation rates still stands out in charts of the postwar economy.
Line chart showing the combined U.S. inflation and unemployment rate.
But the direction of travel for major aspects of the economy has caught economists' attention. When Fed officials this week assessed the risks they see ahead they pointed uniformly towards higher inflation and higher unemployment than previously expected.
Line chart of Fed risk perceptions.
"Stagflation-lite," is what RSM chief economist Joe Brusuelas titled his analysis of the Fed's meeting last week. Policymakers' forecasts "implied mild stagflation ahead in the near term as growth slows and inflation increases," he said, noting the "pervasive uncertainty around the size and magnitude of the trade shock."
'NOTHING MORE UNCOMFORTABLE'
Fed policymakers last week left interest rates unchanged but still anticipate two quarter-point cuts by year-end. Their new economic projections, however, laid bare their conundrum. Growth is anticipated to slow, unemployment to rise a bit more than expected, and inflation to accelerate in the face of existing and widening tariffs.
Implied by their forecasts of rate cuts and higher inflation is a belief that tariff-triggered price increases would be one-off jumps, the same assumption the Fed made early in the pandemic when it called rising prices "transitory" - and was proven wrong.
Things are different now. Factories and ports are open and goods are flowing.
But given the scope and breadth of what Trump is planning, officials say the outcome remains unpredictable.
Hard macroeconomic data, as Fed Chair Jerome Powell noted in his press conference last week, remain solid. The misery index is rather low, in fact.
But softer measures like sentiment are sliding, something policymakers feel could cause businesses to stall investment and hiring and households to cut back, even as tariffs lead prices to keep rising. Fed officials note growing concern among business contacts, and have begun discussing the difficult choice moments of stagflation pose for a central bank tasked with controlling inflation while sustaining employment.
“There is nothing more uncomfortable than the stagflationary environment...where both sides of the mandate start going wrong. There is no generic answer...Which is worse? Is it bigger on the inflation side? Is it bigger on the job market side?" Chicago Fed President Austan Goolsbee said Friday on CNBC. "Higher tariffs raise prices and reduce output, so that is a stagflationary impulse."
Bar chart of Fed economic projections.
NOTHING TAKEN FOR GRANTED
If the Fed is caught in the middle, its priority is clear: To ensure that not just inflation, but public expectations about inflation, remain under control.
Perhaps the key mistake of the 1970s was a failure to understand better the role that public psychology plays in future inflation. Scarred by rising prices, Americans' belief that costs would keep on rising kept pushing prices higher even as the economy weakened.
It took punishing interest rates and two successive recessions under Fed chief Paul Volcker to begin to establish the Fed's credibility and reset expectations through the rest of the 1980s and into the 1990s.
That's a lesson Powell has said he takes to heart, and one he says he won't repeat.
"I don't see any reason to think that we're looking at a replay of the '70s or anything like that...Underlying inflation is still running in the twos, with probably a little bit of a pickup associated with tariffs," Powell said at a press conference after the Fed's most recent meeting. "I wouldn't say we're in a situation that's remotely comparable to that.
But stable inflation expectations are "at the very heart of our framework," he said. "We will be watching all of it very, very carefully. We do not take anything for granted."
