Consumer confidence plunged for the fourth consecutive month in March, with The Conference Board’s Consumer Confidence Index falling 7.2 points to 92.9, its lowest level since January 2021. Even more troubling, the Expectations Index — a gauge of how consumers view future income, business, and labor market conditions — plummeted to 65.2, the lowest level in 12 years.
The sharp drop in expectations is seen as a critical signal of recession risk. Historically, an Expectations Index reading below 80 has often been associated with recessions. Stephanie Guichard, Senior Economist at The Conference Board, noted that consumers’ optimism about future income, which had remained resilient, “largely vanished” this month.
The fall in consumer confidence appears to be driven by a confluence of factors, including persistent inflation, escalating concerns over tariffs, and economic uncertainty. Average 12-month inflation expectations rose to 6.2 percent from 5.8 percent in February, reflecting ongoing anxiety about the rising cost of living.
Older Americans and middle-income households were most affected by declining confidence, with the drop particularly pronounced among those over 55 years old. Only consumers under 35 showed slight improvement, primarily due to a better assessment of present conditions.
The Conference Board does not break down its results by partisan affiliation. A similar survey from the University of Michigan released last week showed that sentiment among Democrats fell sharply, with the expectations index falling to its lowest level ever. Sentiment dipped only slightly among Republicans, with the index of current conditions improving and the expectations index declining. Independents came in between the two camps. Similarly, Democrat expectations for inflation soared, while Republican inflation expectations showed GOP voters expect almost no inflation at all.
President Trump’s tariffs, announced earlier this month, are also weighing on sentiment. According to the Conference Board’s report, many consumers expressed concern over potential price increases resulting from new tariffs on goods from China, Mexico, and Canada. This has prompted some households to make big-ticket purchases sooner, hoping to avoid expected price hikes.
However, the broader economic picture is more complex. Despite the negative sentiment, labor market conditions remain resilient, with 33.6 percent of consumers reporting jobs as “plentiful.” This contrasts sharply with the gloomy outlook for the future, where only 16.7 percent expect more jobs to be available, while 28.5 percent anticipate fewer jobs.
Some analysts argue that the real driver of consumer pessimism is not tariffs themselves but underlying inflationary pressures fueled by the previous administration’s spending policies and the Fed’s premature cuts at the end of last year.
The share of consumers expecting higher interest rates over the next 12 months rose to 54.6 percent from 52.6 percent, while those expecting lower interest rates dropped further to 22.4 percent. The Federal Reserve’s latest projections, released last week, showed that officials expect to raise their target rate twice this year.
Meanwhile, intentions to buy big-ticket items like appliances and electronics ticked up, reflecting a desire to make purchases before impending tariffs drive prices higher.
The rising anxiety about the economy and rising inflation expectations put the Fed into a difficult position. If consumers are right that the labor market will soften significantly, this would ordinarily call for the Fed to ease policy to lift employment. On the other hand, the Fed is likely to be concerned about rising inflation expectations because Fed economists largely believe rising expectations can push inflation itself higher. That could mean the Fed will hold rates steady for longer to avoid igniting a new wave of rising prices.
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