Consumers grew more pessimistic about the economic outlook in February, as worries brewed regarding a slowing economy and rising inflation, according to a report by the Conference Board on Tuesday. The board's Consumer Confidence Index slipped to 98.3 for the month, marking a decline of 7 points and falling below the Dow Jones forecast of 102.3. This represents the lowest reading since June 2024 and the largest monthly drop since August 2021.
Views on current labor market conditions have weakened, with consumers expressing pessimism about future business conditions and becoming less optimistic about future income, as noted by Stephanie Guichard, the board's senior economist for global indicators. Pessimism about future employment prospects has worsened, reaching a ten-month high.
The decline in consumer confidence coincides with President Donald Trump threatening additional tariffs against U.S. trading partners. Trump announced on Monday that duties against Canada and Mexico will proceed in March following a delay in February. Economists express concern that these tariffs could trigger another round of inflation, especially as the Federal Reserve considers whether to lower interest rates further or maintain the current rates while assessing the impact of Trump's aggressive fiscal and trade policy actions.
"We should expect some short-term behavioral shifts within the consumer," wrote Jeffrey Roach, chief U.S. economist at LPL Financial. Consumers are increasingly nervous about the unknown impacts of potential tariffs and may advance consumer demand in anticipation of higher import prices in the near future.
Following the release of the report, stocks briefly moved lower, while Treasury yields experienced a sharp decline. The 10-year Treasury yield, a traditional barometer for growth expectations, fell nearly 10 basis points, or 0.1 percentage point, to 4.29%.
Although most economic indicators reflect continued growth, the Conference Board gauge aligns with other recent surveys indicating waning confidence. Last week, the University of Michigan reported a larger-than-expected monthly decrease of nearly 10% in February, with the five-year inflation outlook among respondents reaching its highest level since 1995.
In the Conference Board survey, the decline in confidence was observed across age groups and income levels, covering data up to February 19. Alongside the overall drop in confidence, the Expectations Index plunged 9.3 points to a reading of 72.9. This is the first time since June 2024 that the measure has fallen below the level consistent with recession. However, the current conditions measure showed slight improvement, with 19.6% indicating that conditions are good, up 1.1 percentage points from January.
A closely watched measure of the labor market indicated worsening conditions, with 33.4% of respondents stating that jobs are plentiful, while 16.3% reported that positions are hard to get. This compares to respective readings of 33.9% and 14.5% in January.
