US Consumer Confidence Sees Largest Decline in Over Three Years

US consumer confidence saw its steepest decline in three and a half years in February, with 12-month inflation expectations rising sharply, signalling growing anxiety over the potential economic impact of President Donald Trump’s policies.

The Conference Board’s survey, released on Tuesday, noted that “comments on the current administration and its policies dominated the responses.” The report follows last week’s surveys showing sharp declines in both business and consumer sentiment. Tariffs on imports—either already imposed or planned by Trump—were identified as a key concern in nearly every survey of households and businesses.

Economists said the unprecedented layoffs of federal government workers were also weighing on consumer sentiment, posing a risk to spending, which is the main driver of the economy.

“Americans are increasingly pessimistic about the outlook. No federal government has ever before threatened workers with mass firings, and it is starting to scare the daylights out of consumers,” said Christopher Rupkey, chief economist at FWDBONDS. “The economy could well grind to a halt in the first quarter of the year as consumers stay home.”

The Conference Board’s consumer confidence index dropped 7 points—the largest decline since August 2021—to 98.3 in February. Economists polled by Reuters had expected a drop but only to 102.5. This marked the third consecutive monthly decline, pushing the index to its lowest level since June 2024 and placing it at the bottom of the range seen since 2022.

“There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019,” said Stephanie Guichard, senior economist for global indicators at The Conference Board. “Most notably, comments on the current administration and its policies dominated the responses.”

Consumer and business sentiment had surged following Trump’s re-election victory on 5 November, driven by hopes for a less stringent regulatory environment, tax cuts, and controlled inflation. However, in his first month in office, Trump imposed an additional 10% tariff on Chinese imports and suspended a 25% levy on imports from Mexico and Canada until March. This month, he also raised tariffs on steel and aluminium imports to 25%.

Further tariffs on automobiles, semiconductors, and pharmaceutical imports are looming. Meanwhile, tens of thousands of federal workers, mainly those on probation, have been dismissed by billionaire Elon Musk’s Department of Government Efficiency (DOGE), an entity created by Trump.

US stocks fell following the release of the confidence data, while the dollar weakened against a basket of currencies and US Treasury yields declined.

Although economists are not yet predicting a recession, they expect prolonged slow economic growth combined with high inflation, putting the Federal Reserve in a challenging position. The US central bank paused interest rate cuts in January as policymakers assessed the economic impact of Trump’s policies.

Since September, the Fed has reduced its benchmark overnight interest rate by 100 basis points as part of its policy easing cycle, following a cumulative 5.25 percentage point hike in 2022 and 2023 to combat inflation.

Faridah Abdulkadiri

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