March 25, 2025
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The Conference Board reported that consumer confidence declined 7.2 points in March to 92.9 after having fallen 5.2 points in February. After hitting a peak in November confidence has plunged in the past four months as consumers worry about the inflationary impact of tariffs.
Senior Economist at the Conference Board, Stephanie Guichard, said, “Consumer confidence declined for a fourth consecutive month in March, falling below the relatively narrow range that had prevailed since 2022. Of the Index’s five components, only consumers’ assessment of present labor market conditions improved, albeit slightly. Views of current business conditions weakened to close to neutral. Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low. Meanwhile, consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”
Tariffs are making consumers nervous and their inflation expectations for coming years have been on the rise. At the same time their expectations for future growth seem to be shrinking and in the eyes of some a recession is possible late in the year. We have a hard time getting as pessimistic. The economy keeps cranking out new jobs although the pace of job creation is slowing down a bit. Trump is promising significant de-regulation early in his presidency. The stock market is near a record high level. And most economists expect GDP growth this year of 2.0-2.5%.
Given the magnitude of the earlier declines in confidence in the past thee months one might have expected a sharp pullback in consumer spending. But that has not happened. Instead, real consumer spending has risen 3.0% in the past year. With real disposable income rising 1.8%, we expect consumer spending to climb by about 2.0% in 2025.
The current 4.3% funds rate should decline to 4.1% by the end of 2025. That should reduce mortgage rates from 6.8% currently to 6.2% by the end of 2025. All of that should tend to boost the pace of economic activity.
Confidence data reported by the Conference Board are roughly matched by the University of Michigan’s series on consumer sentiment. As shown in the chart below, trends in the two series are identical but there can be month-to-month deviations.
Stephen Slifer
NumberNomics
Charleston, SC
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