Stock market outlook dims, and job growth fears rise as inflation and tariffs weigh on sentiment
US consumer confidence declined in March, marking the fourth consecutive monthly drop, according to The Conference Board's report released on Tuesday.
According to CNBC, the US Consumer Confidence Index fell 7.2 points to 92.9, missing economists' expectations of 93.5.
The Expectations Index, which reflects consumers’ short-term outlook on income, business, and labour market conditions, dropped 9.6 points to 65.2, according to Reuters. This marks the lowest level in 12 years and falls well below the recession-signalling threshold of 80.
Stephanie Guichard, senior economist for global indicators at The Conference Board, said consumers have largely lost optimism about future income.
She added that growing concerns about the US economy and labour market are now influencing how people view their personal finances.
The decline in consumer confidence coincides with growing concerns over US President Donald Trump's tariff policies, which have contributed to market volatility and heightened inflation expectations.
According to Reuters, the University of Michigan's consumer survey also reported a significant drop in sentiment, with the index falling to 57.9 in March, the lowest since November 2022.
Long-term inflation expectations surged to levels not seen since 1993, reflecting apprehension about the economic impact of tariffs.
In response to rising prices and economic uncertainty, US consumers are reducing their spending.
Synchrony Financial reported that high prices and a challenging economic environment have led to increased delinquencies in auto loans, credit cards, and home equity lines.
US Retailers such as Target and Walmart have observed more cautious shopping behaviours, with consumers opting for deals or cheaper alternatives.
The US labour market outlook has also weakened, as per Reuters.
The percentage of consumers expecting more jobs to be available declined to 16.7 percent in March from 18.8 percent in February, while those anticipating fewer jobs rose to 28.5 percent from 26.6 percent.
Economists are increasingly concerned about the potential for “stagflation,” a combination of stagnant growth and rising inflation, reminiscent of the 1970s.
Federal Reserve Chair Jerome Powell emphasized the importance of monitoring inflation expectations to prevent a similar scenario.
Despite these challenges, some analysts remain cautiously optimistic, as reported by MarketWatch.
Tom Lee, co-founder and head of research at Fundstrat, suggested that the recent stock market rally could signify the beginning of a significant upward movement, driven by bullish momentum and reports of potentially less severe tariffs than anticipated.
However, the overall US economic outlook remains uncertain as consumers and investors navigate the impacts of trade policies, inflationary pressures, and labour market fluctuations.
