US consumer confidence drops by most since 2021 on outlook
US CONSUMER confidence fell this month by the most since August 2021 on concerns about the outlook for the broader economy, adding to evidence that uncertainty over the Trump administration’s policies is weighing on households.
The Conference Board’s gauge of confidence decreased seven points in February to 98.3, marking the third straight decline, data released on Tuesday (Feb 25) showed. The figure was below all estimates in a Bloomberg survey of economists.
Stocks and bond yields fell after the report.
A measure of expectations for the next six months also fell by the most in three-and-a-half years, while a gauge of present conditions declined more modestly.
The drop in confidence was broad across age groups and incomes. Consumers were more pessimistic about current and future labour-market conditions, as well as the outlook for incomes and business conditions. Perceptions of present and future financial situations worsened, and the share of respondents expecting a recession in the next year rose to a nine-month high.
“References to inflation and prices in general continue to rank high in write-in responses,” Stephanie Guichard, senior economist of global indicators at The Conference Board, said. “Most notably, comments on the current administration and its policies dominated the responses.”
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Tuesday’s report reinforces other surveys that show consumer and business sentiment is waning after an initial surge of optimism in the wake of Donald Trump’s election victory. Households and companies now appear more wary of higher prices due to tariffs, especially as inflation pressures seem to be intensifying again and the labour market gradually cools.
Some companies have started to take notice.
“The consumer right now is confused,” said Scott Baxter, chief executive officer of Kontoor Brands, the maker of Lee and Wrangler jeans brands.
“If you just put yourself in their seat, they are worried about work,” the CEO said during the company’s quarterly call with analysts on Tuesday. “They are worried about the businesses that they are in. Are those going to be impacted by some of the layoffs, the tariffs, the current situation right now?”
Inflation expectations over the coming year increased to the highest since May 2023, reflecting the recent jump in the cost of eggs as well as anticipated higher prices from Trump’s planned tariffs. US consumers’ long-term inflation expectations in a separate report from the University of Michigan released last week rose to the highest level in almost three decades.
Federal Reserve officials including chair Jerome Powell have signalled they are keeping interest rates steady until progress on inflation resumes. For the first time since July, a majority of respondents said they expect higher interest rates in the year ahead, according to the confidence report.
Elevated borrowing costs are weighing on buying conditions for big-ticket items such as cars and certain appliances. The share of consumers planning to take a vacation in the next six months declined to the lowest since April 2021.
The share of consumers that said jobs were plentiful ticked down, while the share saying jobs were hard to get rose for the first time in five months. The difference between these two – a metric closely followed by economists to gauge the job market – narrowed for a second month. BLOOMBERG
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