Why is U.S. consumer confidence plunging to its lowest since 2021? Inflation fears, tariffs, and economic uncertainty raise concerns
economic uncertainty. The report suggests that consumers are becoming more cautious about spending as they anticipate higher prices and financial strain in the coming months.
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What is causing the sharp drop in consumer confidence?
The main driver behind this decline is rising inflation expectations. According to the Conference Board, consumers now expect inflation to rise to 6% over the next 12 months, up from 5.2% in the previous survey. This increase has raised concerns about affordability and household budgets.
Another factor is uncertainty over government policies and trade tariffs, which have been frequently mentioned in consumer responses. Mentions of trade and tariffs reached levels not seen since 2019, indicating a growing fear that these factors will drive up the cost of goods.
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How is inflation affecting consumer spending?
Rising inflation expectations are making consumers more cautious about their spending habits. The University of Michigan’s consumer sentiment index, another key indicator, fell to 67.8 in early February, marking a seven-month low. Consumers are now expecting price increases in essential items, which may lead to a slowdown in discretionary spending on goods like electronics,
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