Consumers’ economic pessimism is worsening as inflation stays hot and a series of new reports flash alarms days before the White House expands its trade war.

In February — with much of President Donald Trump’s tariff agenda announced but not yet implemented — stubborn inflation collided with tepid spending, a closely watched federal report showed Friday. The data indicated many households are paring back on hotel stays and dining out to cover pricier groceries and health care.

The financial firm ING called the new numbers ‘ugly’ and flagged ongoing stagflation risks, saying ‘we are moving in the wrong direction’ as Trump’s trade war and spending cuts threaten to worsen things.

Wells Fargo analysts, who similarly warned of an ‘ugly’ quarter ahead, said if there’s one ‘silver lining’ to the report, it’s that ‘income growth was broad and supported by decent wage gains.’ But ‘​​to judge from consumers’ own reported inflation expectations, which have been rising, they are going to need the extra support,’ they wrote.

Consumers’ attitudes are indeed growing gloomier.

Economic sentiment slid 12% this month in the University of Michigan’s latest survey, also released Friday, and expectations for the future plunged 18%. The researchers described ‘a clear consensus’ in which ‘Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation.’

In a separate survey published Tuesday by the Conference Board, a century-old business and economic think tank, households’ expectations hit a 12-year low.

‘Consumers have expressed their concern,’ said Mark Hamrick, senior economic analyst at Bankrate. ‘But the risk is that this goes beyond attitudes and infects behavior.’

He pointed to signs in Friday’s data that households are protectively stashing away more disposable income, ‘opting to go to the sidelines to wait for more clarity on prices and taxes on imports.’ Many businesses are doing the same, he said, which would be a ‘toxic cocktail’ for the economy if the trend continues.

The warning signs are mounting after weeks of chaotic policy rollouts by the president, who slapped 25% tariffs on foreign-made vehicles and auto parts Wednesday and is preparing to unveil a broad range of ‘reciprocal’ tariffs next week. Details about that new tranche of import duties, set for what Trump calls ‘Liberation Day’ next Wednesday, remain scarce. 

Recent polling shows voters growing uneasy with the administration’s trade agenda, which Wall Street investors and analysts see as increasingly likely to throw the flawed but sturdy economy Trump inherited into a recession.

The three major U.S. stock indexes fell Friday following the new economic data. Markets have juddered for weeks on the pileup of policy moves and statements by White House officials — some of them contradicting one another over how much, if any, pain consumers should expect from the administration’s changes.

Consumer spending, which powers about two-thirds of the U.S. economy, has slowed but hardly collapsed in the opening months of this year. Retail sales rose a modest 0.2% in February even as households prioritize necessities over nonessential purchases. New vehicle sales rose 1% in the first quarter, according to Edmunds, though industry analysts now fear a reversal as automakers and dealers hike prices to offset tariff costs.

Many brands, meanwhile, are relying more on wealthy customers to prop up sales, and executives across industries foresee slower growth in the year ahead.

That could lead the Federal Reserve to hold off on lowering borrowing costs. Policymakers weighing the latest data are likely to decide that ‘any conversation around [interest] rate cuts needs to be pushed back to the second half of the year,’ Joe Brusuelas, chief economist at the accounting firm RSM, wrote Friday.

For consumers, that means credit card rates north of 20% are set to stick around. While rates for popular 30-year fixed mortgages have eased to a still-steep 6.71%, policy uncertainty threatens recent improvements in a housing market that remains widely unaffordable. And while yields on 10-year Treasury bonds have cooled lately, analysts see that more as a reflection of growing concern about the economy’s direction.

‘With all this change, a dense fog has fallen,’ Federal Reserve Bank of Richmond President Tom Barkin said in public remarks Thursday. ‘It’s not an everyday, ‘forecasting is hard’ type of fog. It’s a ‘zero visibility, pull over and turn on your hazards’ type of fog.’

Tariff anxieties are also ricocheting through boardrooms as executives draw up a fresh batch of earnings reports to start releasing around mid-April.

Nearly 900 nonfinancial companies mentioned tariffs on recent earnings calls, S&P Global Market Intelligence said last week. But many firms have yet to factor those impacts into their forecasts, a holding pattern that ‘reflects the enormous level of uncertainty around when tariffs might be enacted, for how long, at what rate, what exceptions might apply, and what retaliatory measures might mean,’ the analysts wrote.

Gross domestic product expanded by 2.4% at the end of 2024, slightly more than anticipated, government economists said Thursday, with relatively strong consumer spending offsetting a drop in investment. But productivity is increasingly expected to slow.

The Federal Reserve Bank of Atlanta now forecasts a contraction in the first quarter, saying many businesses are likely to ramp up orders before tariffs take hold and then tighten their purse strings. JPMorgan and KPMG foresee GDP expanding by just 1% in the first quarter, and Goldman Sachs downgraded its outlook from 1% previously to 0.6% after Friday’s data.

JPMorgan hasn’t ruled out a rate ‘closer to 0%.’

The current situation stands in contrast to the economic renaissance Trump campaigned on launching from his first day in office.

He vowed on the stump to begin lowering prices ‘immediately,’ but the consumer price index has been rattling stubbornly between 2.4% and 3.7% since June 2023. On Friday, the Fed’s preferred inflation gauge came in hotter than expected, at 2.8% as of February.

Other economic milestones look far off, too.

We’re going to have a market the likes of which nobody’s ever seen before.

President Donald Trump

Trump promised to halve energy costs within a year, but oil-and-gas producers now worry that instability could drive down prices and lead them to throttle production to protect their margins. While the industry funneled tens of millions of dollars into Trump’s re-election, drillers slammed him in an anonymous survey released Wednesday. One unnamed executive called Trump’s ‘drill, baby, drill’ mantra ‘nothing short of a myth and populist rallying cry’ and said his ‘administration’s chaos is a disaster for the commodity markets.’

Gas prices, while nearly 40 cents cheaper than a year ago, have begun their seasonal rise.

Trump also pledged to ‘take’ other countries’ jobs and factories and create ‘thousands and thousands of businesses and trillions of dollars in wealth,’ yet manufacturing output contracted last month while employment levels in that and other sectors remain flat.

President Donald Trump said Wednesday that his tariffs will generate $600 billion to $1 trillion for government coffers within a year.

Consumers call for a lifeline as Trump's tariff 'Liberation Day' nears

Economic sentiment is deteriorating as inflation persists and tariffs announced by President Donald Trump are expected to impact consumer spending and the broader economy. The University of Michigan's latest survey shows a significant drop in consumer optimism, while the Conference Board reports a 12-year low in household expectations. Tariffs on foreign-made vehicles and auto parts, along with potential reciprocal tariffs, are causing concern among consumers and businesses, with many opting to save disposable income and delay non-essential purchases.