Why Is Consumer Confidence Tanking?
Consumer sentiment indexes have shown sharp declines since January.
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Consumer confidence in the economy has plummeted since the start of the year.
The latest consumer sentiment readings for April are some of the lowest ever. On April 29, the Conference Board reported that its Consumer Confidence Index dropped by 7.9 points to 86.0 in April, down from 92.9 in March and 100.1 in February.
When survey respondents were asked what is affecting their views of the economy, they overwhelmingly made comments on tariffs, rising prices, inflation and uncertainty about the economy. They also cited high cost of living and stock market volatility.
The drop in consumer confidence was shared across different political affiliations, and most income and age groups.
Meanwhile, the April consumer sentiment readings for the University of Michigan Index are also low .
The all-time low was 50 in June 2022 at the height of inflation, but current levels, 52.2 in April, match months during the stagflation of the 1980s, as well as the Great Recession and its aftermath.
Is consumer sentiment a sign of a recession ahead?
The Consumer Confidence Survey’s Expectations Index for April, which is based on consumers’ short-term outlook for income, business and the labor market, dropped to its lowest level in 13 years.
Now at 54.4, the Expectations Index is well below the threshold of 80 that usually indicates a recession ahead.
The combination of weak consumer sentiment and worrying data indicators have led to murmurs of “recession” entering the discourse again.
On March 9, in a Fox News interview, President Donald Trump did not rule out the possibility of a recession in the near term. His administration has repeatedly called the current status of the economy a “period of transition.”
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