Key Takeaways

Consumers are feeling uneasy about the economy as many are shifting their focus to tariffs, inflation and politics.

Consumer confidence registered the largest monthly decline in more than three years, with The Conference Board survey falling seven points to 98.3 in February, dropping further than economists expected. The decline follows similar results from the Michigan Survey of Consumers released last Friday, with each report helping send stocks lower as investors worry that spending will slow.

Inflation remained a top concern in the survey, with consumers raising their year-ahead inflation expectations to 6%. Policy proposals from President Donald Trump weighed on the survey results.

“There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019,” said Stephanie Guichard, senior economist at The Conference Board, referencing tariff proposals in Trump’s first term . “Most notably, comments on the current administration and its policies dominated the responses.”

Economists believe that tariffs could increase costs for households as merchants pass on the increased import taxes to consumers. Some said the tariff threats could be especially important to consumers who have still not recovered from the spike in prices caused by COVID-related supply chain issues.

“We suspect that many consumers still have unhealed scar tissue from the price spikes of recent years and as a result have become skittish about potential signs of inflation heating back up,” wrote Wells Fargo economists Tim Quinlan and Jeremiah Kohl. “Tariff worries are rattling consumers' cages in a way that they perhaps did not in the current President's first term.”

Read the original article on Investopedia