The impulse of US President Donald Trump in increasing consumer feeling has become a fall caused by him.
Americans are still concerned about climbing and Trump’s random trade war, according to the latest consumer survey at the University of Michigan released on Friday (14).
Consumer feeling fell 11% this month, reaching 57.9, showed a preliminary reading, below 64.7 registered last month, indicating its lowest level since November 2022. It is a sharp retreat compared to December, after the US presidential election, when the feeling had risen to its highest level in months.
The implementation of the Trump government has long been promised and controversial: earlier this month, Trump imposed 25% tariffs on Mexico and Canada, just to postpone these rates again after business leaders’ appeals; Then, after US tariffs on steel and aluminum imports came into force last Wednesday (12), the European Union and Canada responded quickly with their own tariffs.
This has made uncertainty intensify in recent weeks, shaking Wall Street and making it difficult for companies to plan future planning, according to recent business surveys. It also generated inflation fears.
The expectations of Americans for inflation next year rose from 4.3% to 4.9% this month, the highest level from November 2022 “and marking three consecutive months of significant increases of 0.5 points percentage or more”, according to a statement.
“Many consumers cited the high level of uncertainty around policies and other economic factors; Frequent fluctuations in economic policies make it very difficult for consumers to plan the future, regardless of their political preferences, ”said Joanne Hsu, director of the research, in a statement.
“Consumers of all three political affiliations agree that the perspective has weakened since February,” she added.
Uncertainty at a point of inflection?
Tariff -induced uncertainty occurs as the US economy shows some signs of weakness – and it is not yet known if the situation will get worse.
In January, consumer spending fell for the first time in almost two years, with the fall in the construction of houses. Executives from large companies such as Target, Walmart and Delta Air Lines recently warned of consumers feeling pressured and possibly retreating this year.
A real -time forecast of the Federal Reserve Bank of Atlanta, closely observed, shows that the economy is contracting at 2.4% in the current quarter.
And of course, a lot of consumer research has shown that Americans are feeling uncomfortable.
Trump did not rule out the possibility of a recession this year, when asked in an interview that aired on Sunday (9). This triggered a massive liquidation from Wall Street.
Still, the economy has managed to remain stable simply because the US labor market is remaining stable, with unemployment still at a historically low level.
“The consumer has been the ‘load donkey’ of this economic cycle that will remain the case even while going through this slower consumption patch,” said Jeff Schulze, head of economic and market strategy at Clearbridge Investments, to CNN. “And the biggest driver of consumption in the US tends to be the job market.”
An economic puzzle for the Fed
In addition to signs of economy’s slowdown, short -term inflation expectations have increased in recent months, as Trump’s rates threaten to increase inflation if a global trade war comes out of control – a toxic combination that resembles “stagflation.”
This is a scenario where growth stabilizes or becomes negative as inflation increases. Federal Reserve authorities have been trying to interpret the various signs of the economy and prepare for their next monetary policy meeting next week.
“You have essentially opposite forces in the economy,” said Tom Bruce, a macro investment strategist in Tanglewood Total Wealth Management. “With tariffs, you have the threat of higher prices; And with the feeling of decline, you begin to have concerns about growth because companies will not be investing in the way they would do otherwise, which can damage economic growth. ”
In recent speeches, Fed’s policy formulators have signaled that they are inclined to maintain stable interest rates next week and in the coming months, while waiting for some clarity on how the economy will respond to a series of Trump policy changes.
Fed President Jerome Powell said last week that the way the Central Bank will respond to the “net effect of these changes in politics,” which, in addition to tariffs, also covers an aggressive repression of immigration and mass layoffs.
“It’s not just what is happening to tariffs, but what is happening with the growth of all other things as a result of these broad changes in economic policy, not just tariffs,” Powell said.
