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Home World News Africa

Consumer sentiment plunges as US ‘frightened’ of ‘sharply higher prices’

March 14, 2025
in Africa
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Consumer sentiment plunges as US ‘frightened’ of ‘sharply higher prices’
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Weakness in sentiment reflects a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation.

Consumer sentiment in the United States has plunged to a nearly two-and-a-half-year low, and inflation expectations have soared amid worries that President Donald Trump’s sweeping tariffs, which have ignited a trade war, would boost prices and undercut the economy.

The deterioration in sentiment in March and inflation expectations reported by the University of Michigan Surveys of Consumers on Friday were across political party affiliations with consumers saying “frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”

That mirrors similar concerns in some business surveys. The uncertainty created by Trump’s on-again, off-again tariffs as well as an escalation in trade tensions risks derailing an economic expansion. Fears of higher prices, which drove consumers’ long-term inflation expectations to levels last seen in early 1993, create a challenge for Federal Reserve officials as they consider the next steps for monetary policy.

“The jury is back, and the verdict is in. Trump 2.0 policies are harming the economy and the future prosperity of America,” said Christopher Rupkey, chief economist at FWDBONDS. “The consumer is frightened and sees sharply higher prices ahead despite the assurances from Washington that trade tariffs are good for the economy.”

The University of Michigan said its Consumer Sentiment Index dropped to 57.9, the lowest level since November 2022, from a final reading of 64.7 in February. Economists polled by the Reuters news agency had forecast the index falling to 63.1.

The index has erased all the gains posted in the aftermath of Trump’s election victory in November.

The weakness in sentiment this month reflected a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation, business conditions and the stock market.

Republicans recorded a 10 percent drop in their expectations index while independents saw a 12 percent decrease. Expectations among Democrats tumbled 24 percent.

“Consumers from all three political affiliations are in agreement that the outlook has weakened since February,” said Surveys of Consumers Director Joanne Hsu. “Many consumers cited the high level of uncertainty around policy and other economic factors.”

Tariff whiplash

Trump has slapped a raft of tariffs on a wide range of goods from key trading partners like Canada, China and the European Union, which have responded with duties of their own. Some tariffs have been imposed and then suspended for a month.

Trump on Thursday threatened to hit Europe with a 200 percent tariff on wine, cognac and other alcohol imports. The tariff whiplash and escalation in the trade war have rattled financial markets, sparking selloffs on stock markets, which also contributed to depressing sentiment this month.

Consumers’ 12-month inflation expectations jumped to 4.9 percent, the highest since November 2022, from a 4.3 percent prediction in February. Over the next five years, consumers saw inflation running at 3.9 percent. That was the highest reading since February 1993 and compared with 3.5 percent in February.

Stocks on Wall Street were trading higher on Friday after being battered in prior sessions. The dollar was little changed against a basket of currencies. US Treasury yields rose.

Fed officials meeting next week are expected to leave the US central bank’s benchmark overnight interest rate in the 4.25 percent to 4.5 percent range, having reduced it by 100 basis points since September, as they continue to assess the economic impact of the Trump administration’s policies.

Financial markets expect the Fed to resume cutting borrowing costs in June after it paused its easing cycle in January amid a darkening economic outlook. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.

Trump has also embarked on an unprecedented campaign to drastically shrink the government through tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, which has slashed funding and fired thousands of federal workers.

Unions representing some of the civil servants have challenged the layoffs, resulting in reinstatements.

A Reuters/Ipsos poll of Americans conducted Tuesday and Wednesday showed 57 percent of survey participants believe Trump’s moves to shake up the economy are too erratic, and 53 percent think the tariff war will do more harm than good.



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Tags: Business and EconomyDonald TrumpeconomyFinancial marketsInflationInternational TradeNewstaxtrade warUnemploymentUnited StatesUS & Canada
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