According to a recent report from the Conference Board, US consumer confidence has plummeted to its lowest level in over 11-1/2 years. The decline was attributed to mounting anxiety over a sluggish labor market and high prices, which could lead households to become more cautious about spending. This downturn in confidence is concerning as it may add pressure on President Donald Trump to address the affordability crisis, which economists blame on his policies, including sweeping tariffs on imports.
While some economists worry that this slump in confidence may be accompanied by poor perceptions of the labor market, they do not expect it to influence the Federal Reserve's policy meeting. The US central bank is expected to leave interest rates unchanged on Wednesday. Consumers' expectations were the lowest in nine months, which some economists say flags a slowdown in spending.
Despite this, experts note that the relationship between confidence and consumer spending has been weak, and they would be surprised if the decline in confidence proves to be an entirely false signal. 5 this month, the lowest level since May 2014. 9.
The drop was sharpest among consumers aged 35 and older, households with annual incomes below $15,000, and those making $50,000 and over. Confidence also fell among higher-income households. Higher-income households have largely driven strong spending, which economists call K-shaped, helping to underpin the economy even as job growth has almost stalled.
The decline in confidence was attributed to elevated references to prices and inflation, oil and gas prices, food and grocery prices, tariffs, trade, politics, the labor market, health insurance, and war. As a result, households may become more cautious about spending, which could have significant implications for the economy.