Concerns About the Stock Market and Trump's Tariffs Have Dented Consumer Confidence

Consumer confidence, which briefly surged post-election, faltered at year’s end due to concerns about the U.S. stock market and the potential impact of new tariffs on the cost of living.

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In December, the Conference Board reported that its consumer confidence index fell by 8.1 points to 104.7, the lowest level in three months. This decline surprised economists polled by The Wall Street Journal, who had predicted an increase to 113.

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The survey revealed significant consumer apprehension about the future. The expectations index, which gauges outlooks for the next six months, dropped by more than 12 points to 81.1. This figure hovers just above the 80 mark, often viewed as a recession signal.

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"Consumers became a bit less bullish about the stock market in December," said Dana Peterson, the Conference Board’s chief economist. This shift in sentiment preceded the Federal Reserve's announcement that it would reduce interest rates less aggressively in 2025 than previously expected—a decision that led to notable stock market losses last week.

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Additionally, nearly half of the respondents expressed concerns that tariffs proposed by President-elect Donald Trump could increase their cost of living in the coming year.

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Amid these worries, there were some brighter spots. Consumers anticipated inflation in 2025 would rise at its slowest pace since 2020. Furthermore, the survey indicated that more Americans plan to purchase big-ticket items, such as cars, within the next six months. Such intentions suggest a degree of optimism, despite broader economic concerns.

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Economists advise focusing on consumer behavior rather than sentiment surveys. While consumer confidence remains well below pre-recession highs, household spending has been robust enough to sustain above-average economic growth. Analysts expect consumer spending to moderate somewhat in 2025 but do not foresee a significant slowdown that would threaten the economy’s current expansion, now entering its fourth year.

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On Monday, major U.S. stock indices responded to the mixed economic signals. The Dow Jones Industrial Average and the S&P 500 opened slightly lower, while the tech-heavy Nasdaq posted a modest gain.

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The dip in confidence reflects heightened uncertainty as Americans weigh the potential impact of tariffs and market volatility against positive trends like easing inflation expectations. While sentiment has waned, actual spending habits remain steady, underscoring the resilience of consumer-driven economic growth.

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Analysts will continue to monitor consumer spending patterns in 2025, particularly as inflation trends, Federal Reserve policies, and geopolitical developments evolve. For now, the economy remains supported by steady household activity, even as confidence metrics signal caution.

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