Consumer Confidence In U.S. Economy Plunges To 12-Year Low—A Sharp Reversal From January’s Record Optimism – Financial Freedom Countdown

Just two months ago, Americans were riding a wave of economic optimism not seen in years.

According to a Gallup poll conducted from January 2 to 15, 2025—shortly before President Donald Trump was set to return to office, Americans expressed their most upbeat economic outlook in over seven years.

Majorities expected growth, a booming stock market, and lower interest rates.

But by March, the mood had flipped dramatically.

March Survey Shows Confidence Has Collapsed

The latest Consumer Confidence Survey released on March 26, 2025, reveals that Americans’ confidence in the direction of the economy has plummeted to a 12-year low, starkly contradicting the Gallup findings from January.

The swift and significant drop in optimism highlights a growing unease about inflation, persistent high interest rates, and overall economic uncertainty.

Consumer sentiment took a dramatic dive in March, marking the fourth consecutive month of decline and sending warning signals through the economy. The Conference Board’s Consumer Confidence Index® dropped 7.2 points to 92.9, revealing growing unease about the current and future state of the economy.

Expectations Index Plunges Below Recession Threshold

Perhaps most alarming is the Expectations Index, which fell 9.6 points to 65.2—the lowest level in 12 years and far below the recession-warning threshold of 80. This index measures consumer expectations around income, business conditions, and employment for the next six months. A number this low has historically preceded economic downturns.

Economists had expected a modest decline in confidence, predicting a reading of 93.5 for March. Instead, the drop to 92.9 underscores how quickly sentiment is deteriorating—faster than even analysts anticipated.

January 2025 Gallup Poll Painted a Rosy Picture

In sharp contrast, Gallup’s January 2–15 survey found Americans feeling more optimistic than at any point in the past seven years. Majorities of Americans expected economic growth and the stock market to rise. The outlook for inflation and interest rates was also the most hopeful since before 2017.

Gallup reported:

75% of Republicans expected stock market and economic growth to increase.
60% believed interest rates and inflation would fall.
57% thought unemployment would decline.

Even independents and some Democrats showed measured optimism—especially regarding the stock market.

Confidence in U.S. Economic Direction Hits 12-Year Low

Now, with the Expectations Index at its lowest level since May 2013, that optimism has all but vanished. High borrowing costs, stubborn inflation, and uncertainty surrounding domestic policies have undermined consumer trust in the economic outlook.

Why This Sudden Shift?

A combination of persistent inflation, elevated interest rates, and growing political uncertainty has fueled the recent downturn in sentiment. Consumers who had hoped for easing financial conditions in early 2025 are now facing a more expensive reality.

“Consumer confidence declined for a fourth consecutive month in March, falling below the relatively narrow range that had prevailed since 2022,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board

Confidence Decline Driven by Older Consumers

The fall in sentiment wasn’t evenly distributed. Consumers over 55 were hit hardest, with sharp declines in optimism. Those aged 35 to 54 also saw their confidence drop, though less severely.

Interestingly, consumers under 35 became slightly more optimistic, possibly buoyed by a stronger view of current conditions.

Spending Plans Are Being Pulled Back

The March report also shows a reduction in spending intentions:

Plans to buy homes, autos, and major appliances fell.
Vacation intentions—both domestic and international—declined as well.

Plans to buy big-ticket items are falling, consistent with a lack of confidence in near-term financial stability. This could further slow economic momentum and signal potential trouble ahead for consumer-driven sectors of the economy.

High-Income Households the Only Ones Holding On

While most income brackets saw confidence slide, one group bucked the trend: households earning over $125,000 annually. Their confidence held steady, likely thanks to greater financial cushions and less sensitivity to inflation or labor market fears.

Job Market Confidence Holding—for Now

While economic confidence has taken a nosedive, the labor market remains one of the few bright spots. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—decreased 3.6 points to 134.5

Consumers’ outlook was particularly bleak, with growing pessimism about future business conditions and confidence in employment prospects plunging to a 12-year low.

Optimism About Income Vanishes

Confidence in future income prospects collapsed in March. Only 16.3% of consumers expect their incomes to rise, down from 18.8% a month ago. Meanwhile, 15.5% expect to earn less in the year ahead—an increase from 12.8% in February.

Optimism about future income—which had remained surprisingly resilient in recent months—eroded almost entirely, indicating that concerns over the economy and job market are now affecting consumers’ personal financial expectations.

Gallup’s Optimism Was Fueled by Republicans

In January, the Gallup poll showed solid majorities of Republicans expecting improvement across all five economic factors—growth, inflation, interest rates, unemployment, and the stock market.

That optimism is clearly no longer reflected in March’s data, which does not break down expectations by party but shows a broad-based decline across demographic groups.

While optimism in January was largely driven by Republican voters, March’s data suggest that concern over the economy is spreading across party lines.

Inflation Expectations Are Back in Focus

52% of Gallup respondents in January predicted inflation would rise. That fear has now become a dominant theme in the March survey, particularly among lower- and middle-income households.

Inflation expectations climbed from 5.8% in February to 6.2% in March. Consumers remain concerned about rising prices on everyday essentials like eggs, as well as the looming impact of new tariffs, which could worsen cost pressures even further.

Interest Rate Relief Now Seen as Less Likely

Back in January, 41% of Gallup respondents hoped interest rates would fall—outnumbering those who thought they’d rise. But by March, consumers increasingly expect rates to stay higher for longer.

This shift mirrors Fed Chair Jerome Powell’s recent comments suggesting rate cuts will be delayed due to persistent inflation.

Stock Market Optimism Has Deteriorated

Gallup’s January reading marked its most optimistic view of the stock market since 2019. But with recent volatility and fears of continued Fed tightening, investor sentiment appears to have soured.

Just 37.4% believe equities will gain in the next year, a steep drop from February’s 47.2% and down 20 points since November 2024. Meanwhile, 44.5% now expect stock prices to decline.

March’s market turbulence added to the gloom. The steep drop in stock market optimism suggests many consumers now see market instability as a longer-term issue, not a temporary blip.

A Warning Sign the Fed Can’t Ignore?

With confidence plunging and expectations falling below recession levels, this report may serve as a critical signal to policymakers. The Federal Reserve, facing pressure to balance inflation control with economic stability, may soon need to reconsider its stance.

Americans Are Losing Confidence in Their Financial Futures

The percentage of consumers expecting their incomes to increase fell in March, as did expectations for overall business conditions. This represents a dramatic reversal from January’s upbeat mood.

The speed of this reversal—from January’s highs to March’s deep lows—is both rare and alarming. It reflects how sensitive consumer sentiment is to persistent price pressures, political tension, and a sense of economic stagnation.

More Americans Now Expect Things to Get Worse

For the first time since the early 2010s, more Americans now expect the economy to worsen in the next six months than improve. This marks a dramatic swing from January, when most Americans were expecting gains.

The January-to-March plunge in economic expectations shows how fragile consumer confidence truly is. Just weeks after Americans were hopeful for a rebound, they are now bracing for more economic pain.

If economic conditions continue to deteriorate—or even if they remain stagnant—consumer sentiment may keep falling, dragging spending and growth with it.

January’s Gallup survey captured a rare moment of post-holiday optimism. But the March Consumer Confidence Survey reveals a nation deeply uncertain about what’s next.

The percentage of consumers anticipating a recession in the next 12 months stayed at a nine-month high. Although the figure didn’t rise in March, its persistence suggests deep-seated anxiety about the near-term economic trajectory.

With expectations hitting a 12-year low, Americans appear to be bracing for a rougher road ahead—just months after thinking the worst might be over.

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