What: US consumer confidence hits a three-year low in February 2025, with significant concerns about inflation, tariffs, and recession prospects, despite slight improvements in current business conditions and stable income expectations.

Why it is important: The contrast between current business conditions and future expectations highlights a critical juncture in consumer sentiment that could reshape retail spending patterns and force strategic adaptations across the industry.

Consumer confidence has plunged to its lowest level in over three years, reflecting growing unease about various economic conditions affecting household finances. The Conference Board Consumer Confidence Index's February decline of 7 points to 98.3 marks the third consecutive monthly decrease and the largest single-month drop since August 2021. While current business conditions showed slight improvement, consumers' outlook for the next 6-12 months has weakened considerably. Inflation expectations have surged from 5.2% to 6.0%, and the share of consumers expecting a recession has reached a nine-month high. The impact of tariffs is particularly concerning, with two-thirds of consumers anticipating price increases on typical purchases, though younger consumers show more willingness to wait and see. Despite these concerns, income expectations remain positive, suggesting potential continued spending in the near term, though with more selective and value-conscious purchasing behavior.

IADS Notes: The February 2025 consumer confidence decline reflects broader market challenges identified throughout recent months. As reported in February 2025, Trump's tariff announcements triggered significant consumer anxiety, with confidence indices showing their sharpest decline since 2021 . This concern is well-founded, as March 2025 analysis projects annual household costs increasing by USD 1,200 due to tariffs, with specific sectors facing price increases ranging from 0.81% to 1.63% . While January 2025 data showed potential for global economic growth at 2.8% , recent evelopments have dampened this outlook, with March 2025 data showing 62% of consumers expressing serious concerns about rising retail prices .

Major retailers are actively responding to these challenges, as evidenced by Macy's March 2025 announcement of aggressive store optimization and supply chain restructuring . This convergence of tariff pressures, consumer anxiety, and retail adaptation suggests a fundamental shift in market dynamics, requiring retailers to carefully balance pricing strategies with consumer sensitivity to cost increases. The situation is particularly complex given the varying responses across age groups and income levels, indicating the need for nuanced approaches to different consumer segments.

Few silver linings in the consumer mood as Americans grow more gloomy