American consumers closed out the year with frayed nerves. The Conference Board’s consumer confidence index slipped 3.8 points in December to 89.1 — a level not seen since April, when a wave of new tariffs first rattled markets.
The drop isn’t dramatic in isolation, but it’s part of a steady slide: December marked the fifth straight monthly decline. More troubling is a subindex that measures short‑term expectations for income, business conditions and the job market — it held at 70.7, still well below the 80 threshold many economists watch as an early warning sign of recession. That reading has now been under 80 for 11 months.
The cold numbers
- Overall consumer confidence: 89.1 (down 3.8 points)
- Current economic assessment: 116.8 (down 9.5 points)
- Short‑term expectations: 70.7 (unchanged)
- Share saying jobs are “plentiful”: 26.7% (down from 28.2%)
- Share saying jobs are “hard to get”: 20.8% (up from 20.1%)
Survey write‑ins made it plain why people are sour: prices and inflation remain top concerns, closely followed by tariffs and trade uncertainty. Mentions of politics, immigration, war and personal finance topics such as interest rates, taxes and banking also rose in December responses.
Why the mood matters even as growth shows up
It’s a striking disconnect: the U.S. economy posted an unexpectedly strong 4.3% annualized growth rate in the third quarter, and consumers keep spending — consumer outlays still account for roughly two‑thirds of economic activity. Yet confidence and some labor indicators point the other way.
Part of the contradiction comes from the labor market. Payrolls grew modestly in November (about 64,000 jobs), but that followed an October revision showing a loss, and the unemployment rate nudged up to 4.6% — the highest since 2021. Economists describe the market as “low hire, low fire”: companies are cautious about adding staff amid policy uncertainty, including the effect of tariffs and lingering high interest rates. Since March, monthly job creation has averaged roughly 35,000, well below the 71,000 monthly pace seen in the year ending last March.
Fed Chair Jerome Powell has even signaled that headline job numbers could be revised downward, which feeds the uncertainty households feel when they think about wages and job security.
Tariffs and inflation: two recurring worries
The April comparison is telling: consumer confidence now sits near the level it did after the administration began rolling out broad import taxes on trading partners. Tariffs show up in the survey not just as a political gripe but as a practical fear — higher costs for goods, supply chain strains and the threat of retaliatory measures that can hurt industries and jobs.
At the same time, inflation remains a persistent concern. Even if headline inflation has moderated from its peak, many households still feel the pinch at the grocery store, the pump and in monthly bills. That lived experience often matters more for spending decisions than aggregate price indexes do.
The short‑term outlook
Analysts say the immediate risk is a further softening in household spending if worries deepen. But opinions diverge: some point out that rising incomes can sustain spending for a while despite weaker sentiment, while others warn that if the job market cools more meaningfully, consumer demand could follow.
One clear implication is for policymakers and businesses: consumer mood is fragile and sensitive to political and policy signals. That means tariff policy, interest‑rate guidance from the Federal Reserve, and any labor‑market shocks could have outsized effects on how households behave.
For now, shoppers are still buying, but they’re doing so with shorter horizons and more caution. Holiday receipts and third‑quarter growth make for upbeat headlines, but confidence surveys are a reminder that sentiment — not just sales — shapes the path forward for the broader economy.