U.S. Consumer Confidence Plummets 10.4% in March, Recession Fears Rise

The U.S. Consumer Confidence Index has experienced a significant decline in recent months, indicating growing apprehension among Americans regarding the state of the economy. According to the University of Michigan's Surveys of Consumers, the consumer sentiment index dropped to 57.9 in March, down from 64.7 in February. This decline was primarily driven by a decrease in the Current Conditions Index, which fell from 65.7 to 57.9. The drop in consumer sentiment has sparked concerns among investors and economists, who are closely monitoring economic indicators for signs of a potential recession.

The Conference Board's Consumer Confidence Index also recorded a sharp decline in February, marking the biggest monthly drop since August 2021. This decline in consumer confidence is part of a broader trend of economic uncertainty, exacerbated by escalating trade tensions and shifting tariff policies. The aggressive policies pursued by the administration have sent business and consumer confidence plummeting, raising the chances of an economic downturn.

The Penta-CivicScience Economic Sentiment Index (ESI) also fell sharply by 1.4 points to 33.5, further deepening the ongoing downturn in consumer sentiment. Confidence in the overall U.S. economy decreased by 2.1 points to 37.1, while confidence in personal finances decreased by 1.6 points to 53.4. Confidence in buying a new home decreased by 0.1 points to 22.8, and confidence in making a major purchase remained unchanged at 23.6. These declines in consumer sentiment are indicative of a broader economic slowdown, as consumers become more cautious about their spending and investment decisions.

The Federal Reserve Bank of Atlanta’s GDPNow estimate projected a slowdown in the U.S. economy for the first time this quarter on February 28. The model’s estimate for annualized gross domestic product (GDP) growth predicted a contraction of -1.5 percent on February 28, reflecting weaker-than-expected trade and consumer spending data. The estimate has since decreased further to -2.4 percent on March 6. If these estimates for negative GDP growth come to pass, it would be the first quarterly contraction of the U.S. economy since early 2022. In the wake of these data and broader economic uncertainty, the administration declined to rule out a recession in 2025, citing the need for a period of transition as the economy adjusts to new policies.

The U.S. Bureau of Labor Statistics’ February Jobs Report showed that U.S. employers added 151,000 jobs last month, coming in slightly below economists’ expectations. The unemployment rate ticked upward slightly from 4.0 percent to 4.1 percent. Federal government jobs declined by 10,000 since the previous month, likely due to the federal hiring freeze. This reflects the first decline in federal employment since June 2022. Some analysts have noted, however, that job losses from the administration’s efforts to reduce the federal workforce are not yet accounted for in the jobs report.

The decline in consumer confidence and the broader economic uncertainty have also had an impact on the stock market. The S&P 500 had wiped all gains made since November 2024 by March 10, and stocks slipped further on March 11, with the S&P 500 index falling by 0.76 percent, and the Nasdaq composite index dropping 0.18 percent. These declines underscore investor concerns about potential economic disruptions resulting from trade disputes and shifting tariff policies.

The next release of the ESI will be on Wednesday, March 26, 2025, and economists will be closely monitoring the data for signs of a potential recovery in consumer sentiment. The decline in consumer confidence and the broader economic uncertainty have raised concerns about the potential for a recession in 2025, and policymakers will need to take steps to address these concerns and restore confidence in the economy.