The United States experienced a significant drop in consumer sentiment in March, plummeting to a more than two-year low, according to a preliminary report by the University of Michigan. This unexpected downturn revealed a much weaker consumer sentiment than economists had predicted, sparking concerns about the state of the American economy and the impact of the Trump administration’s economic policies.
The preliminary data showed that the index fell to 57.9, a rather significant decrease from the previous month’s 64.7. This drop marks the lowest level of consumer sentiment seen since November 2022, as noted by the researchers who compiled the data. This unexpected drop caught economists off guard as they had anticipated consumer confidence to remain relatively steady. This information was corroborated by FactSet, a financial-data company.
Carl Weinberg, a commentator at High Frequency Economics, stated that these results could be seen as a reflection of the ‘Great Uncertainty’ surrounding the economic policies put forward by the Trump administration. Weinberg warned that due to this uncertainty, consumer spending may become more restrained and cautious until the Trump economic agenda becomes clearer.
Daniel Hornung, former deputy director of the National Economic Council, noted the impact of the White House’s policy uncertainty on consumer sentiment. He stated that this uncertainty has led to a steep drop in consumer sentiment, the lowest level since inflation peaked more than two years ago. This economic turbulence has sent the stock market into a correction phase and led forecasters to considerably increase recession probabilities.
The Trump administration’s economic policies and the ongoing threat of a 200% tariff on alcohol imported from the European Union have been the subject of much debate, as shown in a video report by CBS News. The imposed tariffs have been seen as a potential trigger for the drop in consumer sentiment.
Amidst these concerns, more Americans are voicing their worries about the economic impact of President Trump’s ongoing trade wars. Consumers are expecting inflation to rise at an annual rate of 4.9% over the next year, marking their highest expectations since 2022. Although inflation saw a slight decrease in February, these concerns have been amplified by the threat of tariffs, which are essentially import taxes paid by companies such as Walmart and Target. These costs are often passed on to consumers in the form of higher prices, leading to an increase in consumer anxiety.
Bill Adams, Chief Economist for Comerica Bank, highlighted the impact of these issues on consumer confidence. He stated that the combination of layoff headlines, a falling stock market, and fears surrounding tariffs significantly impacted consumer confidence in early March. Adams further noted that the decline in confidence is rapidly becoming a real threat to consumer spending, which traditionally accounts for two-thirds of U.S. economic activity.
American consumers are also increasingly expecting elevated inflation to become a long-term issue. They predict that prices will rise at an annual rate of 3.9% over the next five to ten years. According to the survey, this expectation represents the largest month-over-month increase since 1993. This level of inflation is significantly higher than the Federal Reserve’s goal of reducing the annual inflation rate to 2%.
The surprising downturn in consumer sentiment, coupled with concerns about potential long-term inflation, underscores the challenges facing the American economy under the Trump administration. These findings highlight the need for clear and effective economic policies to restore consumer confidence and ensure the stability of the U.S. economy.
This news was reported by Kate Gibson, a reporter for CBS MoneyWatch in New York, where she covers business and consumer finance. Her reporting has been instrumental in providing insights into the state of consumer sentiment and the broader American economy amidst the uncertainties presented by the Trump administration’s economic policies.
