Consumer confidence is a crucial measure of economic sentiment among households, reflecting their optimism or pessimism about the current and future state of the economy. One of the most widely recognized indicators of consumer sentiment is The Conference Board's Consumer Confidence Index®, which provides valuable insights into spending patterns, economic trends, and potential risks.
Recent Trends in Consumer Confidence

In February, the Consumer Confidence Index® declined by 7 points to 98.3, marking the largest monthly drop since August 2021. This was the third consecutive monthly decline, bringing the index to the lower end of the range observed since 2022. The drop was driven by growing concerns about inflation, labor market conditions, and the broader economic outlook.

  • Present Situation Index: This component, which assesses consumers' views on current business and labor market conditions, fell by 3.4 points.
  • Expectations Index: This measure, which gauges consumers' short-term outlook for income, business, and labor market conditions, saw a sharper decline of 9.3 points to 72.9. Notably, this is the first time since June 2024 that the Expectations Index has fallen below the threshold of 80—a level that could signal a potential recession ahead.

 
Increasing worries about inflation
A key factor behind the decline in consumer confidence is the resurgence of inflation concerns. In February, average 12-month inflation expectations surged from 5.2% to 6%, the highest level in over a year. This increase reflects several factors, including:

  • Sticky Inflation: Persistent price pressures in categories like housing, healthcare, and transportation.
  • Rising Costs of Household Staples: Sharp increases in the prices of essential goods, such as eggs and other groceries.
  • Potential Impact of Tariffs: Proposed or implemented tariffs on imported goods could further drive up prices, adding to inflationary pressures.


The Runnymede team projects that inflation will trend higher in 2025 but remain below 4%. However, this outlook could change if tariffs are implemented. A 10% increase in the effective tariff rate could push inflation up by an additional 1%, exacerbating consumer concerns.

 

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