US Consumer Confidence Declines Sharply in February

United States consumer confidence experienced its most significant decline in 3-1/2 years during February, Al Jazeera reports, citing the Conference Board.

The survey also revealed a surge in 12-month inflation expectations, indicating concerns among Americans about the potential economic impact of President Trump’s policies.

The Conference Board’s consumer confidence index dropped 7 points to 98.3 this month, the largest decrease since August 2021. Economists had anticipated a decline, but forecasts averaged around 102.5. This marks the third consecutive monthly decrease, bringing the index to its lowest level since June 2024 and the bottom of its range since 2022.

Economists cited concerns over tariffs on imports, implemented or planned by the Trump administration, as a major issue identified by households and businesses. They also pointed to unprecedented layoffs of federal government workers as a potential risk to consumer spending, a key driver of the US economy. These layoffs are attributed to the Department of Government Efficiency (DOGE), an entity created by President Trump.

Following President Trump’s victory in November, business and consumer sentiment had initially risen, driven by hopes for reduced regulation, tax cuts, and low inflation. However, the administration’s subsequent imposition of a 10 percent tariff on Chinese imports, a temporary suspension of tariffs on imports from Mexico and Canada, and recent tariff increases on steel and aluminum imports appear to have negatively impacted consumer confidence. Additional tariffs on automobiles, semiconductors, and pharmaceutical imports are anticipated.

In response to the data, US stocks fell, the dollar weakened against a basket of currencies, and US Treasury yields slipped.

Consumers’ average 12-month inflation expectations rose to 6 percent, the highest since May 2023, compared to 5.2 percent in January.

The survey’s labor market differential, reflecting respondents’ views on job availability, decreased to 17.1 from 19.4 the previous month. This measure is correlated with the unemployment rate reported by the US Department of Labor.

The Federal Reserve has reduced its benchmark overnight interest rate by 100 basis points since September, following a period of significant rate hikes in 2022 and 2023 aimed at curbing inflation.