U.S. consumer confidence has fallen to its lowest level since November 2022, according to the latest University of Michigan survey. The drop comes even though several economic indicators have shown improvement over the past two years.
Recent positive indicators included:
- Inflation easing from 7.1% in November 2022 to 2.9% in December 2024
- Real GDP growing at an annualized 2.3% in Q4 2024
Those trends had supported hopes for a “soft landing,” where inflation moderates without triggering a recession. Despite that, consumer sentiment has weakened considerably.
New Concerns Shaping Expectations
Policy shifts and political developments have altered expectations for 2025. In particular, recent tariff policy changes under President Trump have prompted a reassessment of economic prospects. Survey respondents and market observers now expect:
- Inflation to rise toward 4.9%, a sharp increase from current rates
- A higher perceived risk of recession, with senior officials—including Treasury Secretary Scott Bessent—noting there are “no guarantees” against an economic downturn
These updated expectations appear to have played a significant role in eroding confidence among households and investors.
Market and Sentiment Reaction
Financial markets showed a rebound on Friday, but that rally seemed driven more by relief that no additional tariff announcements were made than by renewed economic optimism. Investors and consumers alike remain cautious: Main Street sentiment has soured and Wall Street’s optimism has weakened.
In short, while headline measures such as lower inflation and modest GDP growth pointed toward stability, shifting policy risks and elevated uncertainty have undercut consumer confidence. The outlook for the economy now depends heavily on how trade and tariff policies evolve and whether they trigger higher prices or slower growth in the months ahead.