U.S. consumer confidence slid sharply in February, posting its steepest decline since August 2021, as Americans grew increasingly concerned about rising prices, weakening job prospects, and the broader economic outlook.
The Conference Board’s Consumer Confidence Index fell 7 points to 98.3, marking its third consecutive monthly decline and falling below economists’ expectations.
More troubling, the Expectations Index—a measure of consumers’ short-term outlook—dropped 9.3 points to 72.9, falling below the level historically associated with a looming recession for the first time since June 2024.
Stocks and bond yields slipped after the report, reflecting heightened investor concerns over economic momentum.
Inflation Creeps Back Up
While tariffs have drawn renewed attention, the bigger concern for consumers appears to be inflation creeping higher following last year’s rate cuts by the Federal Reserve. Inflation expectations jumped from 5.2 percent to 6 percent in February, marking the sharpest increase in nearly a year. Higher costs for household essentials, particularly food, have reinforced worries that inflation is not cooling as quickly as expected.
“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs. References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”
The Conference Board does not break out inflation expectations or confidence by party affiliation. A survey by the University of Michigan released last week showed that while Republicans do not expect higher inflation, Democrats expect tariffs to cause a surge in prices.
At the same time, uncertainty over the timing of potential tax cuts has added to consumer unease. While the Trump administration has outlined broad tax relief plans, implementation could be delayed due to ongoing budget negotiations in Congress. For consumers already adjusting to higher borrowing costs, the prospect of delayed tax relief may be further weighing on sentiment.
Middle-Class Concerns Deepen
The downturn in confidence was broad-based across age and income groups but was particularly pronounced among consumers aged 35 to 55—a key segment of the workforce and the economy. These consumers tend to be the most financially active in homebuying, investing, and discretionary spending, making their growing pessimism a potential warning sign for consumer-driven growth.
Meanwhile, the share of consumers expecting a recession in the next year rose to a nine-month high.
Higher borrowing costs have also weighed on major purchases. Buying plans for cars and electronics fell notably, while homebuying interest continued to recover modestly, likely due to lower mortgage rates.
Stock Market Optimism Fades
Consumer sentiment toward the stock market also took a sharp hit. The share of consumers expecting stock prices to rise fell to 46.8 percent—the lowest since April 2024—down from 54.2 percent in January. Meanwhile, 32.8 percent now expect stock prices to decline, up from 24.8 percent.
This shift in sentiment could have broader implications for consumer spending, particularly among higher-income households, who tend to be more exposed to financial markets.
Fed Expected to Hold Rates Steady
With inflation expectations climbing again, Federal Reserve officials have signaled they are likely to keep interest rates steady for the foreseeable future. Notably, more than half of consumers (51.7 percent) now expect higher interest rates over the next year, the highest share in months. At the same time, only 24 percent expect rates to fall—down from 27.1 percent last month.
While consumer sentiment tends to fluctuate after elections, the latest confidence numbers suggest that households are grappling with a complex economic landscape—one shaped by persistent inflation, high borrowing costs, and uncertainty over tax relief. The sharp downturn in middle-class confidence, combined with a rise in recession expectations, could signal a broader slowdown in consumer-driven economic activity.
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