United States: Can consumers become a constraint on tariff policies?
2025-03-04
■ US consumer confidence index fell sharply in February, indicating worsening consumer confidence and rising inflation expectations
■ However, consumers may still be insufficient to act as a restraining factor in the US government's tariff policy
In the United States, the consumer confidence index released by the Conference Board and the University of Michigan fell sharply in February. The Conference Board's consumer confidence index was 98.3 (down 7.0 percentage points from the previous month), the lowest level since June 2024, while the University of Michigan's consumer confidence index fell to 64.7 (down 7.0 percentage points from the previous month), the lowest level since November 2023. Although the questionnaires of the two surveys are different, the Conference Board survey covers more households, and its results show that the consumer expectation index has fallen due to the deterioration of economic conditions and employment prospects.
What the two surveys have in common is that inflation expectations in the short and medium term have risen sharply, especially inflation expectations for the next year, with the median of the University of Michigan survey at 4.3% and the average of the Conference Board survey at 6.0%. Affected by the bird flu epidemic, egg prices have risen sharply, and the prices of daily necessities have risen, making consumers feel the pressure of prices. In addition, the US government has announced a series of tariff increases, which has further fueled consumers' expectations of future price increases. The World Federation of Exchanges survey report pointed out that the number of times respondents mentioned US government policies, especially trade and tariffs, in their answers has increased significantly. At the same time, the proportion of respondents who expect an increase in the stock market in the next 12 months (46.8%) has dropped to the lowest level in 10 months. Although the consumer confidence index survey does not directly cover economic recession expectations, another survey shows that the proportion of respondents who expect the US economy to fall into recession in the next 12 months has risen to the highest level in 9 months. These survey results show that consumers are more concerned about inflation and are pessimistic about the outlook for the economy and asset prices.
US personal consumption has maintained an above-trend growth momentum until the end of last year, but it slowed temporarily in January this year. If the main reason is weather and natural disasters, it may only be a short-term adjustment. However, judging from the results of the February consumer survey, the surge in the price of daily necessities may be curbing consumption. In addition, the US government's substantial increase in tariffs has exacerbated households' inflation concerns and worsened consumer confidence, and consumers have sounded the alarm about the economic outlook. However, the newly elected US government still maintains a high approval rating, so the impact of worsening consumer confidence is not enough to immediately become a constraint on its promotion of tariff policies. If the government is to adjust its tariff policy (for example, slow down the pace of implementation), at least the economic data released in March and later will clearly show a significant deterioration in economic activity, and the government's political capital (such as voter support reflected in polls) will be damaged, which may become one of the necessary conditions for adjusting the policy.
■ However, consumers may still be insufficient to act as a restraining factor in the US government's tariff policy
In the United States, the consumer confidence index released by the Conference Board and the University of Michigan fell sharply in February. The Conference Board's consumer confidence index was 98.3 (down 7.0 percentage points from the previous month), the lowest level since June 2024, while the University of Michigan's consumer confidence index fell to 64.7 (down 7.0 percentage points from the previous month), the lowest level since November 2023. Although the questionnaires of the two surveys are different, the Conference Board survey covers more households, and its results show that the consumer expectation index has fallen due to the deterioration of economic conditions and employment prospects.
What the two surveys have in common is that inflation expectations in the short and medium term have risen sharply, especially inflation expectations for the next year, with the median of the University of Michigan survey at 4.3% and the average of the Conference Board survey at 6.0%. Affected by the bird flu epidemic, egg prices have risen sharply, and the prices of daily necessities have risen, making consumers feel the pressure of prices. In addition, the US government has announced a series of tariff increases, which has further fueled consumers' expectations of future price increases. The World Federation of Exchanges survey report pointed out that the number of times respondents mentioned US government policies, especially trade and tariffs, in their answers has increased significantly. At the same time, the proportion of respondents who expect an increase in the stock market in the next 12 months (46.8%) has dropped to the lowest level in 10 months. Although the consumer confidence index survey does not directly cover economic recession expectations, another survey shows that the proportion of respondents who expect the US economy to fall into recession in the next 12 months has risen to the highest level in 9 months. These survey results show that consumers are more concerned about inflation and are pessimistic about the outlook for the economy and asset prices.
US personal consumption has maintained an above-trend growth momentum until the end of last year, but it slowed temporarily in January this year. If the main reason is weather and natural disasters, it may only be a short-term adjustment. However, judging from the results of the February consumer survey, the surge in the price of daily necessities may be curbing consumption. In addition, the US government's substantial increase in tariffs has exacerbated households' inflation concerns and worsened consumer confidence, and consumers have sounded the alarm about the economic outlook. However, the newly elected US government still maintains a high approval rating, so the impact of worsening consumer confidence is not enough to immediately become a constraint on its promotion of tariff policies. If the government is to adjust its tariff policy (for example, slow down the pace of implementation), at least the economic data released in March and later will clearly show a significant deterioration in economic activity, and the government's political capital (such as voter support reflected in polls) will be damaged, which may become one of the necessary conditions for adjusting the policy.