Consumer confidence drops to 92.9 as market uncertainty grows
Summary
Last week was another choppy week for markets as data again pointed to a slowing consumer and sticky inflation. U.S. trade policy continues to drive uncertainty, and the announcement of 25% tariffs on imported cars, trucks, and auto parts added to worries. Yields remained largely range-bound as markets digested higher inflation expectations, offset by investor demand as many looked for safety.
Consumer confidence and PCE
Two of the most important releases last week were consumer confidence and PCE, and neither relieved investor anxiety. Consumer confidence fell for a fourth straight month to 92.9 as consumer expectations surrounding future business conditions and employment fell sharply. The recent uncertainty regarding U.S. economic policies, inflation, and equity market declines are worrying consumers enough to change consumption behaviors. If this trend continues, it could be problematic for growth, as consumption is the primary driver of the U.S. economy. Consumer confidence can turn quickly, and if the market can gain clarity around U.S. trade policy, which some are expecting with the announcement of tariffs on April 2, this may reverse in the coming months.
The PCE Index highlighted the Fed's conundrum with slowing growth and sticky inflation. Personal income came in well above expectations at 0.8%, and while it is positive that consumers are earning more, they seem to be slowing on the consumption side. Additionally, income growth will likely put upward pressure on inflation. Personal consumption came in slightly below expectations, and the prior month had a slight downward revision, consistent with a more cautious consumer.
The Core PCE Price Index, which is the Fed’s preferred measure of inflation, increased to 2.8%, slightly above expectations. Overall, the PCE Index was consistent with many economic indicators over the past month, pointing to slowing growth and slightly elevated inflation.
Consumer Confidence Index

*Shaded areas represent periods of recession; Source: The Conference Board, NBER
Other key releases
There were several other notable economic releases last week. Durable goods came in above expectations, however, many economists believe this is likely due to front-loading ahead of tariffs. New home sales were in line with expectations, while pending home sales missed expectations, consistent with prior readings reflecting a weak housing market. Revised Q4 GDP came in as expected at 2.4%, while jobless claims remained stable at 224,000.
The University of Michigan consumer sentiment (final) index fell to 57, and consumer expectations fell to 52.6. More importantly, year-ahead inflation expectations increased to 5%, while longer-term inflation expectations jumped to 4.1%. Most consumer surveys seem to be flashing a consistent warning that they are less optimistic about the future and expect prices to keep rising. If these trends start to show up in hard economic data, markets may experience higher volatility until U.S. policy becomes clearer.
The week ahead
ISM manufacturing and services PMIs, the Job Openings and Labor Turnover Survey (JOLTS), and the jobs report will be the focus for investors this week. Additionally, President Trump is expected to announce a comprehensive list of tariffs on Wednesday.
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