American consumer confidence took another hit this March, fueled by rising inflation fears and tariffs imposed by former President Donald Trump, as indicated by the latest survey from the University of Michigan. The consumer confidence index fell to 57.9, marking a significant 10.5% decrease from February and falling short of the Dow Jones consensus estimate of 63.2. This sharp decline also reflects a 27.1% drop compared to the same time last year, making it the lowest level since November 2022.
While the index measuring current conditions saw only a modest decrease of 3.3%, expectations for the future plummeted by 15.3% compared to the previous month and 30% compared to last year. This decline highlights growing concerns among consumers, especially related to economic policies.
The increased inflation apprehensions stemmed from new tariffs imposed by Trump on trade partners, which included taxes on aluminum and steel. Just last week, Trump threatened to impose steep 200% tariffs on alcoholic beverages imported from the European Union, following the EU’s decision to slap tariffs of 50% on American whiskey and other goods. Such actions have only intensified anxiety about inflation among consumers.
Adding to these worries, the inflation forecast for the coming year rose to 4.9%, which is 0.6 percentage points higher than February—the steepest forecast since November 2022. Over the span of five years, the inflation outlook soared to 3.9%, marking a 0.4 percentage point increase and the highest level since February 1993.
Interestingly, stock markets seemed unfazed by the survey results, continuing their upward trend, whereas Treasury yields rose. Despite consumer confidence being shaped often by political leanings, the survey results revealed declines across all demographic groups and political spectrums.
“Many consumers have pointed to the high degree of uncertainty surrounding economic policies, and the frequent changes to those policies make future planning difficult, regardless of political preferences,” said Joanne Hsu, director of the consumer survey.
Data from the survey indicates expectations have dropped significantly: 10% among Republicans, 24% among Democrats, and 12% among independents. Overall, general consumer confidence has dropped by 22% since December 2024.
Contrasting the inflation forecasts, data from last week revealed consumer price increases to be below expectations, coupled with stagnation of producer prices for February 2025. Despite the challenges highlighted by the survey, markets anticipate the Federal Reserve will hold its monetary policy steady following the conclusion of its two-day meeting on March 19, 2025. Investors, on the other hand, are speculating interest rate cuts of 0.75 percentage points by the year’s end, with the first expected reduction possibly occurring as soon as June 2025.
This mix of uncertain economic signals is likely to leave consumers on edge, wondering how policies and market conditions will evolve. The interplay between trust in government actions and economic indicators remains fragile, with significant impacts expected across both consumer behavior and market trends moving forward.