Could Wobbly Consumer Sentiment and Spending Undercut the Economy? | Global News Avenue

Consumer spending supports the economy to recover from the pandemic, but fears that rising costs may undercut optimism.

In February, consumers expect inflation to worsen in the next 12 months, with an estimated increase of one-tenth of percentage points to 3.1%, according to a New York Fed survey of consumers.

This is the latest signal that consumers are starting to feel worse about the economy. Various measures Consumer sentiment President Donald Trump moves to Implement tariffs– This may be an economic issue.

“The deterioration of confidence is likely to lead to business cuts or at least delays in investments and new employees, consumers delay buying, and for financial risk assets such as stocks, volatility in stocks declines or increases.”

How does consumer sentiment hinder economic growth?

Consumer spending accounts for about 70% GDPa measure of economic growth. Shoppers help the economy Through inflation and Subsequent interest rate hikeas a shopper Keep momentum pass Most of 2024.

Data shows that some consumers are already Look at their wallets Before Trump imposes tariffs. If consumer surveys prove true and every day Americans care about the future of the economy, they may reduce spending, thereby slowing down slow economic growth.

Douglas Porter, chief economist at BMO Capital Markets, wrote that GDP could drop to 1% in the first quarter due to tariff talks. That’s significantly lower than 2.3% in the fourth quarter of last year.

“Part of the negative impact on economic activity stems from the decline in confidence among business, consumers and investors, because the consensus view is that tariffs will be used as a threat and negotiation tool rather than implemented,” Bostjancic said.