The short-term expectations of consumers have fallen to the lowest level in 12 years, ticking the numbers that historically indicate a recession first.
The short-term outlook measure of revenue, business and labor market conditions issued by the conference committee Business Membership Group has declined 65.2 points from February to 65.2 points.
“Consumers’ expectations are particularly pessimistic, with pessimism about future business conditions and confidence that future employment outlook will be the first decline in 12 years,” said Stephanie Gichard, senior economist at Global Indicators for the conference committee, in a release. “On the other hand, consumer optimism about future income, which has been very strong in the past few months, suggests that the economy and labor market concerns have begun to spread to assessments of consumers’ personal circumstances.”
The board said overall consumer confidence has declined for the fourth consecutive month in March, falling below the relatively narrow range that has been prioritized since 2022. Earlier this month, the S&P 500 entered the corrections area, which has declined 10% from its recent high, for the first time since 2022.
As uncertainty grows around the impact of President Donald Trump’s tariff strategy and his attempts to reduce federal agencies, the measure of consumer confidence and expectations has declined in recent weeks.
Last week, the University of Michigan said its confidence index fell in its third month in March. Meanwhile, its future expectations index has fallen to its lowest level since the start of the Covid-19 pandemic.
And the New York Federal Reserve said earlier this month that the percentage of households expecting a year’s financial situation to deteriorate, rising to 27.4%, reaching its highest level since November 2023.
Consumers are also concerned that inflation is not slowing. The conference committee said the median annual inflation forecast has risen to the highest level since May 2023, with the median forecast for the fourth month, and the response to the survey saying “inflation still shows that consumers are of great concern.” He also said, “There is an increasing concern, particularly about the impact of trade policies and tariffs.”
University of Michigan’s future inflation expectations also jumped to the best reading from November 2022 in March, and rose to an abnormally large three-month increase of over 0.5% points.
However, amid widespread decline and concern, evidence emerges that different groups feel more uneasy than others.
The conference committee said the decline in March was driven by older consumers, especially at least 55 years old. In contrast, he said that increased ratings on the current situation actually increased confidence among consumers under the age of 35. And trust among households making more than $125,000 a year remains stable.
And the University of Michigan survey continues to show a deep division regarding the assessment of the economy, according to political affiliation. Among Democrats, Republicans maintain a more favorable outlook, while expectations are at the lowest level on record. In fact, Republican views on current terms have reached its highest since August 2023.
Appearing on CNBC on Tuesday, Stephen Miran, the current chair of the White House Economic Advisors Council, rejected the latest consumer trust data and highlighted recent positive economic data, including low layoffs, stable retail sales and stable housing demand, while pointing to the effects of deep political cleavage in survey responses.
“I don’t think there has been a very strong correlation between trust data and actual consumer spending in recent years,” Milan said. “And… if you go out on the street, people are going their own lives, you know, they’re getting their pay, they’re spending their pay. The economy is marching ahead.”