Consumer confidence in the U.S. has plunged to its lowest level since January 2021, reflecting growing fears over inflation, economic slowdown, and policy instability. The latest report from the Conference Board reveals a sharp 7.2-point drop in consumer sentiment, bringing the index down to 92.9. This continues a downward trend that began in December following the U.S. presidential election.

Economic Pessimism Reaches New Highs

The survey highlights deepening concerns about economic conditions:

Americans’ expectations for business, income, and job market conditions fell dramatically, dropping 9.6 points to 65.2—the lowest level in 12 years.
Inflation expectations remain high, with more consumers believing that prices will continue to rise throughout the year.
Recession fears persist, with the percentage of Americans expecting an economic downturn within the next 12 months staying at a nine-month high.

This combination of weakening growth and rising prices is fueling concerns about stagflation, a scenario in which economic activity slows while inflation remains stubbornly high—something Federal Reserve officials have also warned about.

Trade Wars and Tariff Uncertainty Adding to Market Volatility

The Trump administration’s aggressive trade policies have added another layer of uncertainty to the economy. President Donald Trump’s tariffs on foreign imports—a central pillar of his economic agenda—have led to a chaotic back-and-forth with major trading partners:

25% tariffs on Mexico and Canada were announced earlier this month, only to be postponed following backlash from business leaders.
The European Union retaliated against U.S. metal tariffs, prompting Trump to threaten a 200% tariff on European alcohol.
New “reciprocal tariffs” scheduled for April 2 could be watered down or delayed, adding to the confusion.

The unpredictable nature of these policy swings has rattled businesses, investors, and consumers alike, making it difficult for companies to plan ahead and invest in growth.

Trump Officials Downplay Concerns

Despite the steep decline in consumer confidence, Trump’s Council of Economic Advisers remains unconcerned. Stephen Miran, the council’s chair, dismissed the drop as a reflection of political biases rather than actual economic conditions.

“Folks often let their political views influence their views of the economy, which tends to manifest in the confidence data,” Miran said in an interview with CNBC.

He argued that “hard data” such as job reports and wage growth paint a stronger economic picture than consumer sentiment surveys.

However, some economists caution that soft data can translate into real economic downturns.

“Obviously, we’ve seen some wobbles in the soft data, particularly the consumer surveys, but for it to become concerning, there has to be some pass-through into the hard data, in terms of growth and the labor market,” said Sarah House, senior economist at Wells Fargo, in an interview with CNN.

Federal Reserve Takes a “Wait-and-See” Approach

The economic uncertainty has also put the Federal Reserve in a difficult position as it weighs its next steps on interest rates.

The Fed has kept borrowing costs steady, waiting to assess how the economy responds to Trump’s policies.
Central bankers warn that inflation expectations are creeping up, making it less likely that interest rates will be cut in the near future.
Atlanta Fed President Raphael Bostic said he now expects only one rate cut this year, noting that inflation remains “bumpy” and unpredictable.

“I moved to one (rate cut for this year) mainly because I think we’re going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target,” Bostic told Bloomberg.

Will the U.S. Economy Hold Steady or Take a Downturn?

So far, America’s labor market has remained a bright spot, with unemployment at 4.1% in February and 151,000 jobs added—a sign of resilience. However, economic growth is slowing, with the Atlanta Fed forecasting contraction in the current quarter due to factors like harsh winter weather and weaker consumer spending.

The big question is whether these warning signs will lead to a full-blown recession or whether the economy can stabilize amid uncertainty.

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