Americans continue to grow uneasy about the economy as President Donald Trump wages an erratic trade war that could send US inflation rising and even trigger a recession. Consumer confidence sank 7.9 points in April to a reading of 86, the Conference Board said in its latest survey released Tuesday. That’s the lowest level since May 2020 and a larger decline than economists had projected. The survey’s Expectations Index, which captures people’s outlook on the economy, plummeted 12.5 points this month to 54.4, the lowest level in 13 years. Meanwhile, the share of Americans anticipating a recession in the year ahead climbed to a two-year high, the survey showed. Trump’s tariffs were “on top of consumers’ minds,” according to their write-in responses. “Consumers explicitly mentioned concerns about tariffs increasing prices and having negative impacts on the economy,” the Conference Board said in a release. As the Trump administration reaches its 100th day in power, various surveys and polls continue to show growing pessimism among US consumers. Their spending is the source of America’s economic might, powering about 70% of its output. Since taking office in January, Trump has pushed a chaotic tariff regime, slashed the federal workforce, clamped down on immigration and attacked the Federal Reserve. Not only have Trump’s actions unsettled consumers, but they’ve also sent a chill down Wall Street’s spine. Will people spend like they’re in a recession? Pessimism hasn’t led to weaker spending in recent years, but it’s unclear whether that will remain the case this time around. In June 2022, when consumer sentiment dropped to a record low as inflation reached a four-decade high, Americans continued to open their wallets in the following months. Similarly in 2023, when a standoff in Congress over the debt ceiling unnerved consumers, people still dished out for concerts and travel that year. A study by Fed economists published Thursday showed as much, arguing that people have overestimated the effect of inflation on their finances in recent years, which in turn affected their perceptions of the economy. Researchers linked people’s responses in surveys with their verified purchases from 2019 to 2024. Still, some Fed officials remain worried about America’s souring economic mood and the possibility that consumers could actually pull back this time. “I think there’s lots of reasons to be worried about consumer spending,” Richmond Fed President Thomas Barkin said last week at an event in Richmond, Virginia. “Consumer sentiment has dropped, for example, pretty significantly over the last couple months and consumers seem to be more worried about inflation and worried about losing their job.” Fed officials are also concerned about people’s perception of prices worsening in recent months, which could make the central bank’s job of fighting inflation more difficult, if Trump’s trade war indeed stokes inflation. That’s because inflation expectations can be self-fulfilling, so if people expect prices to ratchet higher, they adjust their spending accordingly. Inflation expectations in the year ahead rose in April to 7%, according to the Conference Board survey, the highest level since November 2022. A similar survey from the University of Michigan has similarly shown a run-up in year-ahead inflation expectations. Looking ahead Trump’s trade war is far from settled and his administration has signaled it’s not going to let up on its aggressive immigration crackdown, but there are other major policy changes on the horizon. The Republican-led Congress, back from its two-week recess, is expected to pass legislation in the coming months to extend Trump’s 2017 tax cuts, which economists say will likely boost the economy — eventually. “You’ll have a tariff-induced slowdown in the second half of 2025, but then fiscal policy will launch up the economy in 2026,” said Nicole Cervi, an economist at Wells Fargo. “We look for personal tax rates to decline across the board, and our operating assumption is that you get an additional disposable income of $150 billion for the household sector in 2026.” Treasury Secretary Scott Bessent told reporters on Monday that “we’ve got three legs to the president’s economic agenda: trade, tax and deregulation, and we hope that we can have this tax portion done by Fourth of July.” Trump has taken tax relief a step further, claiming on Sunday that he will eliminate income taxes and replace that with revenue from tariffs, though such a development would face many hurdles.
Consumer confidence sinks to lowest level since May 2020
TruthLens AI Suggested Headline:
"Consumer Confidence Declines Sharply Amid Economic Concerns and Trade Policies"
CNN
7.1
TruthLens AI Summary
In April, consumer confidence among Americans experienced a significant decline, dropping 7.9 points to a reading of 86, marking the lowest level since May 2020, according to the Conference Board's latest survey. The Expectations Index, which gauges consumers' outlook on the economy, saw an even steeper decline, plummeting 12.5 points to 54.4, the lowest figure in 13 years. This dip in confidence coincides with growing concerns about a potential recession, with the percentage of Americans anticipating an economic downturn reaching a two-year high. Respondents highlighted President Donald Trump's trade policies, particularly his tariffs, as major contributors to their economic anxiety, citing concerns about rising prices and the adverse effects on the economy. Despite the current pessimism, consumer spending remains crucial, accounting for approximately 70% of the U.S. economy, and observers are uncertain if this downturn in sentiment will lead to decreased spending behaviors seen in past years.
Historically, even when consumer sentiment has plummeted, spending has not always followed suit. For instance, in June 2022, despite record-low consumer sentiment due to soaring inflation, Americans continued to spend on leisure activities. However, the current economic climate, coupled with heightened inflation expectations—rising to 7% for the year ahead—presents a more complex scenario. Richmond Fed President Thomas Barkin expressed concerns about the potential ramifications of worsening consumer sentiment and perceptions of rising prices on future spending. As Trump's administration continues its aggressive trade and immigration policies, economists predict that while a slowdown may occur due to tariffs, forthcoming fiscal policies, including potential tax cuts, could eventually stimulate economic growth. Treasury Secretary Scott Bessent outlined a three-pronged economic agenda focusing on trade, tax, and deregulation, aiming to implement tax reforms by the Fourth of July, which could bolster disposable income in the long run.
TruthLens AI Analysis
The report highlights a significant decline in consumer confidence in the United States, primarily attributed to President Donald Trump's trade policies and broader economic concerns. It reflects growing anxiety among Americans regarding inflation and the potential for an impending recession, signaling a troubling shift in economic sentiment.
Consumer Sentiment Analysis
The drop in consumer confidence, measured at 86, indicates a substantial decrease of 7.9 points from the previous month. This decline is notable as it is the lowest level observed since May 2020. The Expectations Index, which gauges future economic outlook, fell even more sharply, suggesting that individuals are increasingly pessimistic about the economic trajectory. The mention of tariffs and their potential effect on prices is significant, as it reveals that consumers are directly linking government policy to their financial well-being.
Connection to Broader Economic Trends
The timing of this report coincides with various political actions taken by the Trump administration, such as tariffs and federal workforce reductions. These measures are contributing to a climate of uncertainty, which could affect consumer spending habits. While historical data shows that pessimism hasn't always correlated with reduced spending, the current situation may be different given the unique pressures of inflation and recession fears.
Possible Manipulation and Perception Management
The report seems to be aimed at stirring a sense of urgency and concern among the public regarding economic stability. By highlighting consumer fears and connecting them to specific political actions, the narrative could be perceived as a critique of the current administration's handling of economic policy. This could suggest an underlying agenda to influence public opinion against Trump’s policies.
Implications for Financial Markets
The news may have implications for financial markets, particularly if consumers begin to alter their spending behaviors in response to economic anxiety. Stocks related to consumer goods or discretionary spending could be affected as investors gauge consumer confidence as a barometer for economic performance. A decline in spending could lead to a slowdown in economic growth, impacting market performance.
Social and Political Ramifications
This report may resonate more with demographics that are economically vulnerable or politically opposed to current leadership. It speaks to a broader concern about economic inequality and the effects of government policy on everyday Americans. The findings could fuel political discourse and debates around economic strategies leading up to elections.
Trustworthiness of the Report
The article appears to be grounded in data from the Conference Board, a reputable source for economic indicators. However, the framing and emphasis on certain aspects could suggest a bias in how information is presented, potentially skewing public perception. The report's angle may lead readers to question the reliability of the administration's economic policies.
In conclusion, while the data presented is factual, the implications drawn from it and the framing of the narrative suggest an intention to provoke a specific reaction among readers regarding the economic climate and current political leadership.