Confidence among American consumers fell sharply in February, hitting a 29-month low, while long-run inflation expectations recorded their biggest monthly jump in 32 years, according to the latest University of Michigan consumer sentiment survey.
The data suggest that U.S. households are bracing for some uncertainty—possibly turbulence—which the Trump administration insists will be a short-lived “detox” period as tariffs and other policies take effect, and as government spending shifts to the private sector.
Inflation expectations are also rising. Long-run inflation projections climbed from 3.5 percent in January to 3.9 percent in February—the largest month-over-month increase since 1993. Short-term expectations rose as well, with year-ahead inflation forecasts jumping from 4.3 percent to 4.9 percent, marking the highest reading in 29 months and the third consecutive month of significant increases.
Despite these declines, the data suggest consumers are more concerned about the future than the present, as job market conditions and broader economic indicators remain relatively strong.
Trump has dismissed concerns about a downturn. He told reporters on March 11 that he does not believe a recession is coming “at all” and said that the country is “going to boom.”
He did acknowledge the possibility of short-term disruptions.
“The hard way to do it is exactly what I’m doing, but the results are going to be 20 times greater,” the president said.
Trump’s economic strategy includes resetting U.S. trade relationships, and imposing—or threatening to impose—tariffs to boost domestic manufacturing. Some tariffs have been enacted and later suspended, while others have triggered retaliatory measures, contributing to uncertainty that analysts say is weighing on consumer confidence.
“The consumer is frightened and sees sharply higher prices ahead despite the assurances from Washington that trade tariffs are good for the economy,” said Christopher Rupkey, chief economist at FWDBONDS.
The Trump administration maintains that any economic discomfort will be temporary. Last week, Treasury Secretary Scott Bessent argued that excessive government spending under former President Joe Biden had left the economy too dependent on public funds, and that a transition to private-sector growth is needed.
“The market and the economy have become hooked, become addicted, to excessive government spending, and there’s going to be a detox period,” Bessent said in an interview on March 7 on CNBC’s Squawk Box. He described the shift as a “natural adjustment” as the administration moves “away from public spending to private spending.”
Some analysts believe consumer anxiety may be overstated. Jamie Cox, managing partner at Harris Financial Group, downplayed the significance of the survey’s steep decline.
“Extreme readings are more noise than signal,” Cox told The Epoch Times in an emailed statement. However, he noted that the prospect of fiscal tightening could be unsettling: “I’m pretty sure people won’t like austerity—and these readings may very well reflect what people see coming. Free money has a price, and it’s no fun when it ends.”
Commerce Secretary Howard Lutnick has called Trump’s economic approach “the most important thing America has ever had.” He suggested that even if a brief recession occurs, it will be “worth it.”
“The only reason there could possibly be a recession is because of the Biden nonsense that we had to live with,” Lutnick told CBS on March 11, echoing Trump’s claim that Biden-era spending drove inflation and created an unsustainable economic sugar high. Lutnick said Trump’s policies will be revenue-generating: “They produce growth. They produce factories being built here.”
The University of Michigan’s consumer confidence report comes ahead of the Federal Reserve’s meeting on Wednesday, when policymakers are expected to hold interest rates steady in the 4.25–4.50 percent range.
The Fed raised rates by 5.25 percentage points in 2022 and 2023 to combat inflation, which surged to a multi-decade high of 9 percent during Biden’s tenure.
Meanwhile, in contrast to the University of Michigan data, the latest Freedom Economy Index (FEI) survey reveals a dramatic turnaround in sentiment among America’s small businesses.
The March 2025 survey, which polled a nationwide sample of 50,000 small business owners, shows a seismic shift—with 80 percent now reporting increased economic optimism since November, and 68 percent expecting economic growth in 2025. This marks a sharp reversal from October 2024, when 57 percent were predicting a recession.
