A measure of consumers’ short-term expectations has fallen to its lowest level in 12 years, ticking a figure that has historically signaled recessions ahead.
The measure of the short-term outlook for income, business and labor market conditions published by The Conference Board, a business membership group, fell 9.6 points from February to 65.2, the worst result since 2013 and well below the threshold of 80 that has historically augured negative growth for the economy.
“Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low,” Stephanie Guichard, senior economist of global indicators at The Conference Board, said in a release. “Meanwhile, consumers’ optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”
The board said overall consumer confidence had declined for a fourth consecutive month in March and fell below the relatively narrow range that had prevailed since 2022. Stock market declines likely proved a significant role in the worsening outlook, it said; earlier this month, the S&P 500 entered correction territory — down 10% from its recent high — for the first time since 2022.
Measures of consumer confidence and expectations have been declining across the board in recent weeks amid growing uncertainty about the impact of President Donald Trump’s tariffs strategy and his attempts to downsize federal agencies.
Last week, the University of Michigan said its confidence index had declined for the third-consecutive month in March; its future expectations index, meanwhile, fell to the lowest level since the onset of the Covid-19 pandemic.
And the New York Federal Reserve said earlier this month that the share of households expecting a worse financial situation one year from now had climbed to 27.4%, the highest level since November 2023.
Consumers also remain concerned that inflation is not slowing. The Conference Board said median year-ahead inflation expectations climbed for the fourth-straight month to the highest level since May 2023 and noted that write-in responses to the survey “showed that inflation is still a major concern for consumers.” It also said that “worries about the impact of trade policies and tariffs in particular are on the rise.”
The University of Michigan’s year-ahead inflation expectations also jumped to the highest reading since November 2022 in March and marked three consecutive months of unusually large increases of 0.5 percentage points or more.
Yet within the broad declines and concerns, evidence that different groups feel more uneasy than others emerges.
The Conference Board said March’s declines were driven by older consumers, especially those who are at least 55 years old. By contrast, it said, confidence actually rose slightly among consumers under 35 thanks to an uptick in their assessments of the present situation. And the confidence among households earning more than $125,000 a year has continued to hold steady.
And the University of Michigan’s survey continues to show profound divisions on ratings of the economy according to political affiliation. Among Democrats, expectations are now at their lowest levels on record, while Republicans maintain a much more favorable outlook. In fact, Republicans’ views of current conditions are now at their highest since August 2023.
In an appearance on CNBC on Tuesday, Stephen Miran, current chair of the White House’s Council of Economic Advisers, dismissed the latest consumer confidence data, pointing to the influence of the deep political cleavages in survey responses while also highlighting more recent positive economic data like low layoffs, steady retail sales, and stable housing demand.
“I just don’t think that there’s been a very strong correlation between the confidence data … and actual consumer spending in recent years,” Miran said. “And if … you go out in the street, people are going about their lives, you know, they’re getting their paychecks, they’re spending their paychecks. The economy is marching on ahead.”
