Americans continue to sour on the US economic outlook as uncertainty around President Donald Trump’s policies and higher prices weigh on consumer sentiment.
The latest consumer confidence index reading from the Conference Board was 92.9 in March, below the 100.1 seen in February and the lowest level in more than four years. The expectations index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, ticked down to 65.2 from 72.9 and remained below the threshold of 80 — which typically signals recession ahead — for the second straight month.
This marked a 12-year low for the expectations index, which was driven in part by consumer’s expectations of their financial situation hitting its lowest level in more than two years.
“One of the most significant developments that we have seen was a decline in financial situation expectations from consumers,” Yelena Shulyatyeva, The Conference Board Senior US Economist told Yahoo Finance. “So that seems to suggest that all this uncertainty around economic outlook is really starting to weigh on consumers assessment of how they will fare going forward.”
Tuesday’s reading is one of several that has showed weakening expectations for the economy among consumers. The growing market fear is that consumer’s feeling worse about the economic outlook could prompt more cautious spending.
But both Federal Reserve chair Jerome Powell and economists have questions whether readings in the “soft” survey data like the consumer confidence index will translate to a deterioration in the “hard” economic data like real consumer spending.
“The relationship between survey data and actual economic activity hasn’t been very tight,” Fed Chair Jerome Powell said in a press conference on March 19. “There have been plenty of times where people are saying very downbeat things about the economy and then going out and buying a new car. But we don’t know that that will be the case here. We will be watching very carefully for signs of weakness in the real data.”
For now, economists have largely argued that while the overall growth outlook for the US economy may now be weaker than initially thought coming into the year, there isn’t a clear sign of a significant slowdown.
In a research note to clients on Sunday, Morgan Stanley’s chief global economist wrote that “all the crises about recession” are “probably” overdone. He pointed to January’s decline in retail sales spooking investors, only to then be reversed by a gain in February.
