U.S. consumer confidence plummeted in February, the biggest monthly decline in more than four years, a business research group said Tuesday, with inflation seemingly stuck and a trade war under President Donald Trump seen by a growing number of Americans as inevitable.
The Conference Board reported that its consumer confidence index sank this month to 98.3 from 105.3 in January. That’s far below the expectations of economists, who projected a reading of 103, according to a survey by FactSet.
“The Conference Board survey is the 3rd data point in less than a week (after Fri’s flash PMIs and Michigan sentiment report) making it abundantly clear that Trump-linked policy uncertainty is eroding confidence and tipping the economy (at least) into a slowdown (if not something worse),” Adam Crisafulli, president of investment advisory firm Vital Knowledge, said in a note.
The seven-point drop was the biggest month-to-month decline since August of 2021.
Markets on Wall Street immediately dropped. The S&P 500 fell 0.8% in morning trading, while the Dow Jones Industrial Average slid 1.7%. The Nasdaq declined 1.6%.
Tariff concerns
Respondents to the board’s survey expressed concern over inflation with a significant increase in mentions of trade and tariffs, the board said.
Since taking office in January, President Trump has threatened sweeping tariffs which he says will bolster the U.S. economy over the long term. While it’s not clear that Mr. Trump will enact all the tariffs he’s outlined — he recently gave a 30-day reprieve to Mexico and Canada in his plan to enact 25% import duties on those countries — the president is also signaling plans to move forward with additional tariffs.
Mr. Trump’s plans to lean on new tariffs to enact his trade and other policy objectives has prompted some economists to forecast higher inflation in 2025.
“The Conference Board’s survey mirrors the Michigan survey in showing that consumers’ confidence has deteriorated sharply in the face of threats to impose large tariffs and to slash federal spending and employment,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics said in a research note.
“The weakness of confidence strongly suggests that recent rapid growth in spending on durable goods mostly reflects households pre-empting tariffs,” he added.
The Conference Board’s report Tuesday said that the measure of Americans’ short-term expectations for income, business and the job market fell 9.3 points to 72.9. The Conference Board says a reading under 80 can signal a potential recession in the near future.
The proportion of consumers expecting a recession over the next year jumped to a nine-month high, the board said.
“This index says that consumers are rattled. Their current situation is not so bad, but a growing do not feel so good about the future,” analysts with High-Frequency Economics said in report. “The decline in consumer sentiment since the November election might not be a coincidence,” they added.
Growing pessimism
Consumers’ view of current conditions tumbled 3.4 points to a reading of 136.5 this month and views on current labor market conditions fell again.
“Views of current labor market conditions weakened,” the group said Tuesday. “Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.”
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 for a dent in vehicle sales and at retail stores.
Retail sales fell 0.9% last month from December, the Commerce Department reported last week. The decline, the biggest in a year, came after two months of healthy gains.
Inflation has also remained sticky. So much so that the Federal Reserve has taken a more cautious approach to interest rates, leaving its benchmark borrowing rate alone at its last meeting after cutting it at the previous three. Fed officials have also expressed uncertainty over the new administration’s policies.
The most recent economic data and a pessimistic turn among American households does not bode well for the U.S. economy, experts say.
In a note to clients, Carl Weinberg, chief economist at High Frequency Economics, wrote: “Based on all the indicators showing declining consumer and business confidence and sentiment, we are expecting a slowing economy.”
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.
