Americans became uneasy about the economy in February as inflation expectations surge and consumer sentiment has been rushing for more than two years.
According to a consumer survey at the University of Michigan, American consumer confidence fell sharply in February, hitting a 29-month low, but long-term inflation expectations recorded its biggest monthly jump in 32 years.
This data suggests that US households are decorating due to uncertainty (presumably turbulence). The Trump administration argues that as tariffs and other policies take effect, it will be a short-lived “detox” period as government spending moves into the private sector.
Inflation expectations are also rising. Long-term inflation forecasts rose from 3.5% in January to 3.9% in February. The largest increase in the month since 1993. Short-term forecasts also rose, with inflation forecasts for the same period last year rising from 4.3% to 4.9%, with the highest reading in 29 months and third consecutive months.
Despite these declines, the data suggests that consumers are more concerned about the future than they are now, as job market conditions and broader economic indicators remain relatively strong.
Trump has dismissed concerns about the recession. He told reporters on March 11 that he didn’t believe the recession was coming “at all” and told the country “goes to boom.”
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He acknowledged the possibility of short-term confusion.
“The hard way to do that is exactly what I do, but the outcome is 20 times bigger,” the president said.
Trump’s economic strategy includes resetting US trade ties and imposing or imposing a trustee to boost domestic manufacturing. Some tariffs were enacted and later suspended, while others have caused retaliation measures, contributing to the uncertainty that analysts are weighing consumer trust.
Christopher Lupkey, Chief Economist at FWDBONDS, said:
The Trump administration has argued that economic discomfort will be temporary. Last week, Treasury Secretary Scott Bescent argued that excessive government spending under former President Joe Biden has left the economy because it has relied too much on public funds, and a transition to private sector growth is necessary.
“The markets and the economy are engrossed, addicted, government overexpenditures, and there’s a period of detoxification,” Bescent said in an interview with CNBC’s Squawk Box on March 7. He described this shift as “natural adjustments” as the administration “climbs from public spending to private spending.”
Some analysts believe consumer anxiety may be exaggerated. Jamie Cox, managing partner at Harris Financial Group, downplayed the importance of a sharp decline in the survey.
“Extreme measurements are more noise than signals,” Cox told the Epoch Times via email. However, he said the outlook for fiscal tightening could be unsettling. Free money has a price and it’s not fun to finish. ”
Commerce Secretary Howard Lutnick calls Trump’s economic approach “the most important thing America has ever had.” He suggested that even if a brief recession occurred, it was “worthy.”
“The only reason there may be a recession is because of the Biden nonsense we had to live together,” Lutnick told CBS on March 11, reflecting Trump’s claim that Biden-era spending promoted inflation and produced sustainable economic sugar. Lutnick said Trump’s policies will generate revenue. “They bring about growth. They produce the factories being built here.”
The University of Michigan Consumer Trust Report comes ahead of Wednesday’s Federal Reserve meeting, where policymakers are expected to remain stable in the 4.25-4.50% range.
The Fed rose 5.25 percentage points to combat inflation in 2022 and 2023, surged to decades highs during Biden’s tenure.
Meanwhile, in contrast to the University of Michigan data, the latest Free Economic Index (FEI) survey reveals a dramatic shift in sentiment among American small and medium-sized businesses.
A March 2025 survey, which voted for a national sample of 50,000 small business owners, reported 80% reporting an increase in economic optimism since July and 68% expecting economic growth in 2025.
Andrew Moran contributed to this report.
