The US Consumer Confidence Drops the Most in More Than Three Years

Potential economic concerns are indicated by the US consumer confidence survey, which has seen its biggest decline in more than three years.

With 12-month inflation estimates climbing dramatically in February, US consumer confidence witnessed its biggest dip in three and a half years, indicating increased concern over the possible economic impact of President Donald Trump’s policies.

“Comments on the current administration and its policies dominated the responses,” according to the Conference Board’s survey, which was made public on Tuesday. The finding comes after surveys conducted last week revealed steep drops in consumer and corporate mood. Import tariffs, whether Trump has actually implemented them or plans to do so, were cited as a major concern in almost all surveys of businesses and households.

The economy’s primary engine, consumer spending, is at risk due to the historic layoffs of federal government employees, according to economists.

Americans’ view is becoming more and more bleak. According to Christopher Rupkey, chief economist of FWDBONDS, “no federal government has ever threatened workers with mass firings, and it is beginning to scare the daylights out of consumers.” “If consumers stay at home during the first quarter of the year, the economy may come to a complete standstill.”

In February, the Conference Board’s consumer confidence index fell 7 points to 98.3, the biggest loss since August 2021.
 
Reuters polled economists, who predicted a decline, but only to 102.5. With the index hitting its lowest level since June 2024 and the bottom of the range since 2022, this was the third consecutive month that it has declined.

Stephanie Guichard, senior economist for global indicators at The Conference Board, stated, “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019.” “Most significantly, the responses were dominated by remarks about the current administration and its policies.”

Following Trump’s reelection on November 5, business and consumer optimism had risen due to expectations of lower taxes, less restrictive regulations, and controlled inflation. However, Trump postponed a 25% tax on imports from Canada and Mexico until March and added a 10% duty on Chinese goods in his first month in office. He also increased import duties on steel and aluminum to 25% this month.

Imports of pharmaceuticals, semiconductors, and cars will soon face further duties. Meanwhile, Trump’s Department of Government Efficiency (DOGE), run by entrepreneur Elon Musk, has fired tens of thousands of government employees, mostly probationary ones.

Following the announcement of the confidence report, US Treasury yields decreased, the currency depreciated versus a basket of currencies, and US stocks plummeted.

The Federal Reserve has a difficult situation as experts anticipate extended poor economic growth coupled with high inflation, even if they have not yet predicted a recession. In January, the US central bank held off on lowering interest rates while decision-makers evaluated the effects of Trump’s proposals on the economy.

After raising its benchmark overnight interest rate by a total of 5.25 percentage points in 2022 and 2023 to fight inflation, the Fed has lowered it by 100 basis points since September as part of its policy easing cycle.