Americans’ outlook on the economy has reached its most pessimistic point in over a decade, as rising costs and concerns over economic policies dampen consumer sentiment.
The latest report from the Conference Board shows that the Consumer Confidence Index fell to 92.9 in March, down from 100.1 in February. This marks the lowest level in more than four years. More strikingly, the Expectations Index, which measures consumers’ short-term outlook on income, business conditions, and job prospects, declined to 65.2 from 72.9. Remaining below 80 for the second consecutive month, this reading historically signals a heightened risk of economic downturn.
A key driver of the drop in consumer expectations was growing pessimism about personal financial situations, which fell to their lowest level in over two years. Yelena Shulyatyeva, a senior economist at the Conference Board, noted that economic uncertainty is increasingly weighing on households.
“One of the most significant developments we’ve observed is the sharp decline in financial expectations among consumers,” Shulyatyeva said. “This suggests that broader concerns about the economy are now affecting individual outlooks on personal finances.”
The report also revealed that while consumers’ perception of current labor market conditions improved slightly, future expectations turned more negative. Inflation expectations climbed to 6.2% in March from 5.8% the previous month. Additionally, optimism regarding the stock market eroded, with only 37.4% of respondents anticipating gains over the next year. This is the first time since 2023 that consumer sentiment toward equities has turned bearish.
Meanwhile, concerns over declining income levels have grown. The share of consumers expecting lower earnings over the next 12 months rose to 15.5% from 12.8% in February, the highest level since late 2022. According to Jefferies U.S. economist Tom Simons, this indicates a lack of confidence in job security, limiting the ability of workers to demand higher wages.
“This trend is concerning, though not yet at levels that would suggest an imminent sharp pullback in consumer spending,” Simons wrote in a note to clients.
The latest data contributes to broader concerns about weakening consumer sentiment, raising fears that Americans may begin tightening their spending habits. However, some economists argue that softer survey data does not always translate into real economic slowdowns.
Federal Reserve Chair Jerome Powell cautioned against overinterpreting consumer sentiment surveys, stating that past instances have shown weak confidence metrics not aligning with actual spending behaviors.
“There have been many times when consumer sentiment has been negative, yet spending remained robust,” Powell noted in a March 19 press conference. “We will closely monitor whether this trend reflects in actual economic activity.”
Despite these concerns, many analysts believe that while the U.S. economy may not be as strong as initially projected at the start of the year, a full-fledged recession remains unlikely. Morgan Stanley’s chief global economist recently suggested that fears of an economic downturn are “probably overblown,” pointing to fluctuations in retail sales data as an example of market overreaction.
As policymakers and investors closely track economic indicators, the coming months will determine whether declining confidence is a temporary sentiment shift or an early warning sign of a broader slowdown.
