On February 25, local time, the latest data released by the US Conference Board? - a prominent association of large businesses - unveiled a staggering drop in the Consumer Confidence Index for FebruaryThe index plummeted from 105.3 in January to 98.3, marking a worldwide dip of 4 percentage points against market expectationsThis represents the lowest reading since June 2024 and reflects the most significant monthly decline since August 2021. Notably, this underscores an ongoing three-month downward trend, highlighting alarming tensions in the deeper layers of the US economyAs inflationary pressures continue to soar and protectionist trade policies become more aggressive, average citizens’ concerns about the future are increasingly morphing into the tangible risk of reduced consumer spending.
The Consumer Confidence Index is a critical indicator of economic vitality, and its components have exhibited a profound divergenceAmong the five components evaluated, only the "Current Business Conditions" index experienced a slight increase of 0.7%. Conversely, the remaining four factors underwent a comprehensive deterioration
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The "Future Employment Expectations" index has plummeted to a ten-month low, indicating a waning optimism regarding the labor market, while the "Income Growth Expectations" index has declined for the fourth consecutive month, reflecting a collapse in citizens' confidence regarding wage increases.
A notable area of concern is the performance of the expectations indexThis indicator fell dramatically from 82.2 in January to 72.9, establishing a new low not seen since June 2024 and surpassing the traditional recession warning threshold of 80 for the first timeHistorical data indicates that since the index’s establishment in 1978, whenever the expectations index remains below 80, the probability of the US economy entering into recession within the subsequent twelve months is as high as 73%. This signal undoubtedly casts a shadow over the already fragile economic recovery.
One of the core factors driving the decline in confidence is the sudden escalation in inflation expectationsSurveys reveal that citizens have projected the inflation rate for the next twelve months to soar from 5.2% to 6%, representing the largest monthly increase since November 2022. This shift is profoundly reflected in the perception of daily living costs, where the prices of essential household items like eggs have surged by 28% year-on-year, while energy price indices have remained at elevated levels, intertwined with new tariff policies being contemplated by the governmentWidespread panic regarding a "price spiral" has begun to take root among the public.
The uncertainty surrounding tariff policies exacerbates the market's anxiety
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Recently, the new government has announced its intention to accelerate tariffs against Canada and Mexico, affecting critical sectors including oil importsAccording to estimates from Goldman Sachs, if the proposed tariffs are fully implemented, American consumers would face an additional cost burden of $22 billion annually, equating to an extra $170 in expenses per householdThis figure is particularly sensitive in the Midwest agricultural belt and rust belt, where local households have already experienced negative actual income growth for three consecutive quarters.
The government’s pivot toward protectionist trade policies is reshaping the economic fundamentalsSince taking office in January 2025, the administration has cumulatively announced $35 billion in tariffs, impacting twelve industries including steel and semiconductorsThis "America First" approach starkly contrasts with the previous administration's multilateralism, resulting in significant confusion among the business sector regarding future expectationsA survey by the National Association of Manufacturers indicated that 38% of business owners plan to delay their capital spending initiatives, awaiting clearer policy direction.
This policy tremor has triggered ripple effects across financial marketsOn February 26, the Dow Jones Industrial Average opened with a 1.2% decline, and the yield on the 10-year US Treasury bonds surpassed a critical benchmark of 3.5%. Analysts at Morgan Stanley noted that current market pricing has implicitly suggested expectations of two interest rate hikes in 2025, and the deterioration of consumer confidence could compel the Federal Reserve to adjust its monetary policy stance more swiftly.
Behind the slide in the confidence index lies the tangible pressures faced by ordinary families
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