Consumer confidence declined sharply in February, notching its biggest monthly decline in nearly four years as uncertainty related to Trump’s trade policy also lifted inflation expectations, according to new data released Tuesday morning.
The Conference Board’s Consumer Confidence Index for February came in at a reading of 98.3, a significant drop from January’s revised 105 reading and short of the 102.5 reading expected by economists.
Read more: From $5 eggs to insurance premiums, here’s where prices are rising
“In February, consumer confidence registered the largest monthly decline since August 2021,” Stephanie Guichard, senior economist at the Conference Board, said in a press release. “This is the third consecutive month-on-month decline, bringing the Index to the bottom of the range that has prevailed since 2022.”
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The “Present Situation Index,” which measures consumers’ assessment of current business and labor market conditions, fell to 136.5 in February from 139 in January.
The “Expectations Index,” which tracks consumers’ short-term outlook for income, business, and labor market conditions, also fell to 72.9 in February from 82 last month. Historically, a reading below 80 in that category signals a recession in the coming year. This was the first time since June 2024 that the index came in below that threshold.
Meanwhile, average 12-month inflation expectations jumped from 5.2% last month to 6% in February, echoing other recent data points that highlight greater concerns around tariff uncertainty and the impact those policies could have on inflation.
“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” Guichard said. “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”
President Donald Trump’s revived tariff threats have weighed on sentiment as the administration doubles down on 25% across-the-board tariffs on Canada and Mexico, which are set to come next month. 10% duties on China have already been implemented.
Earlier in February, Trump announced global 25% tariffs on steel and aluminum imports that are expected to take effect on March 12. Trump later ordered that federal agencies study reciprocal tariffs on trading partners.
More recently, Trump said to expect additional duties on autos, chips, and pharmaceuticals. A flat tariff “in the neighborhood of 25%” would apply to all foreign automakers and start as soon as April 2.
“Everybody is talking about inflation rising on the back of tariffs and that is a great concern for the consumer,” Yelena Shulyatyeva, senior US economist at the Conference Board, told Yahoo Finance in an interview following the data’s release.
Notably, February’s decline was broad-based among income groups, including the more affluent cohort of consumers, which has driven the bulk of spending in recent years.
“That is a concern,” Shulyatyeva said. “We know that consumer spending has been in large part driven by those at the top of the income spectrum. … If this is going to slow down significantly, that’s a concern for the economy.”
Eugenio Aleman, chief economist at Raymond James, wrote it’s still “up in the air” whether or not this lack of confidence will translate to weaker economic growth. A second estimate of gross domestic product for the fourth quarter, due Thursday, will serve as the latest test.
“However,” Aleman warned, “the upward move in inflation expectations and the increase in mentions regarding the potential effects of tariffs should serve as wake up call for the administration.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
