Consumer Confidence Drops 8% to 5-Year Low Amid Tariff Fears

Consumer confidence in the United States has plummeted to its lowest level in nearly five years, with growing concerns about employment prospects. The decline in consumer sentiment is largely attributed to the tariff measures implemented by the Trump administration, which have heightened worries about the economic outlook and job security.

The Conference Board, a prominent business research association, reported that the consumer confidence index for April dropped nearly eight points to 86, marking the lowest level since May 2020. This decline is the fifth consecutive month of decrease, the longest such streak since 2008. The index, which measures expectations for the next six months, fell to its lowest point since 2011, while the present situation index also showed a decline.

These findings align with the University of Michigan's consumer sentiment survey, indicating that the public is increasingly concerned about how high tariffs could harm the economy and employment, while also driving up prices. The proportion of consumers who believe that business conditions will worsen in the next six months reached its highest level since March 2009. Similarly, the percentage of respondents who expect fewer job opportunities in the near future hit a 16-year high.

Stephanie Guichard, a senior economist at the Conference Board, noted that the expectations for business conditions, employment prospects, and future income have all deteriorated significantly, reflecting a pervasive sense of pessimism. Some business leaders have also expressed concerns that the decline in consumer confidence could lead to a cooling of demand. They warned that tariffs could drive up prices, further straining consumer budgets.

The Conference Board's report also highlighted that consumer inflation expectations have risen to their highest level since November 2022, with an increasing number of respondents anticipating higher interest rates in the coming year. The proportion of consumers who believe that jobs are "hard to get" rose to 16.6%, the highest since October 2022, while the percentage who believe that jobs are "plentiful" decreased from the previous month. The difference between these two figures, a key indicator of labor market tightness, fell to its lowest level since September 2022.

Despite the recent weakness in "soft data" indicators like consumer confidence, these trends have not yet been reflected in hard data such as consumer spending. Retail sales in March saw the largest increase in over two years, inflation has shown signs of easing, and job growth has rebounded. However, consumer expectations for their personal financial situation have worsened, with the highest proportion of respondents since the onset of the pandemic expecting their income to decrease in the next six months.

Some experts suggest that while the impact of the trade war is currently more pronounced in soft data indicators like consumer sentiment, there are concerns that these effects could eventually spill over into harder metrics such as retail sales, inflation, and the labor market. The ongoing trade tensions and their potential long-term effects on the economy remain a significant area of concern for both consumers and businesses.