Consumer Confidence Collapse: Main Street Gloom and Decade Lows

The numbers tell the story: American households are feeling the squeeze like never before. Leading economic indicators, including the University of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index, have plummeted to lows not seen in over a decade. This isn’t just a blip—it’s a profound crisis of faith in the economy, one that has pushed public mood into territory usually reserved for major recessions. The persistent slide in these benchmarks signals that ‘Main Street Gloom’ is no longer a passing phase but a deeply rooted feature of the current landscape.

Consumer Confidence Hits Decade Lows

The decline in optimism is starkly reflected in the data. As of early 2025, both the Conference Board’s Consumer Confidence Index and the University of Michigan’s Consumer Sentiment Index have registered alarming lows. These indices, built from nationwide surveys, are vital gauges of how Americans view their current finances and future prospects. Their sustained drop below historical averages points to a widespread loss of trust in economic stability—a warning sign that often precedes downturns.

The University of Michigan’s index, in particular, has hovered near historic lows throughout the first quarter of 2025, capturing deep anxiety about household finances and the broader outlook. The Conference Board’s Expectations Index, which measures consumers’ six-month outlook, has tumbled to levels like 54.4—far below the 80-point threshold that often signals a looming recession. The breadth and depth of this decline, cutting across regions and demographics, highlight just how pervasive the pessimism has become.

What’s Fueling the Gloom?

The roots of this crisis are tangled and deep. It’s not a single issue, but a collision of powerful forces eroding household optimism and reshaping spending habits.

Inflation Fears Return

Inflation expectations have surged to levels not seen since the early 1980s. Recent surveys show consumers bracing for year-ahead inflation as high as 7.3%, with five-year expectations also elevated. This sharp rise in expected prices eats away at purchasing power and injects uncertainty into daily life. When people fear that their money won’t go as far, they often cut back on spending—especially on non-essentials—and worry about affording the basics.

The echoes of the early ’80s are hard to ignore. Back then, runaway inflation required aggressive intervention and triggered a deep recession. Today, the sources of inflation are complex—supply chain disruptions, global instability, and strong demand in certain sectors—but the impact is clear: persistent anxiety and a direct hit to consumer confidence.

Trade Turmoil and Tariff Anxiety

Tariffs have become a dominant concern in consumer surveys, with up to 75% of respondents in early 2025 citing them as a significant worry. These trade policies, intended to protect domestic industries, often end up raising prices for everyday goods. The unpredictability of tariff decisions—whether new ones will be imposed, lifted, or retaliated against—creates a climate of uncertainty for both businesses and consumers.

Even temporary pauses in tariffs, such as the one on Chinese goods in May 2025, have done little to calm nerves. For most Americans, tariffs are not abstract policy—they’re a direct threat to household budgets, making everything from electronics to groceries more expensive and fueling the broader sense of unease.

Stagnant Income Prospects

Perhaps most troubling is the growing pessimism about personal income. By early 2025, expectations for future income growth had sunk to a five-year low. With inflation outpacing wage gains, real incomes are effectively shrinking, leaving families feeling poorer and less secure. This squeeze is especially evident in the forward-looking components of confidence indices, as more people doubt their ability to keep up with rising costs.

The result is a vicious cycle: as confidence in future earnings wanes, households pull back on spending, which in turn slows economic growth and further dampens optimism.

Recession Warnings Flash

Consumer confidence isn’t just a mood ring—it’s a leading indicator for the broader economy. When the Conference Board’s Expectations Index falls below 80, history shows a recession often follows within a year. With recent readings plunging to the mid-50s, alarm bells are ringing. Surveys now show the share of Americans expecting a recession in the next year at a two-year high.

This pessimism can become self-fulfilling. When people expect tough times, they spend less and save more. Businesses, anticipating weaker demand, may cut back on hiring or investment. The feedback loop between expectations and behavior can tip the economy into the very downturn people fear.

For a closer look at these trends, see US Consumer Sentiment Close to Record Low.

Partisan Divides Deepen the Crisis

Economic perceptions are increasingly split along political lines. Data from late 2024 and early 2025 reveal a widening partisan gap, with supporters of the party in power reporting more optimism and opposition supporters expressing deeper gloom—often regardless of the actual numbers. This polarization complicates the interpretation of headline confidence figures and can even affect spending and investment patterns across different groups.

The challenge for policymakers is to separate genuine economic anxiety from partisan sentiment. While the current gloom is widespread, its intensity and expression are often colored by political affiliation, making it harder to craft effective responses that address the real issues facing all Americans.

Lessons from Past Crises

Comparing today’s sentiment with past economic shocks helps put the current malaise in perspective. The 2008 financial crisis saw confidence collapse amid housing and banking turmoil, while the early 1980s were marked by stagflation and deep malaise. The COVID-19 pandemic brought a sudden, sharp drop in confidence, followed by a volatile recovery.

What sets the current downturn apart is its persistence. Rather than a single, dramatic event, it’s a slow erosion driven by inflation, stagnant incomes, and geopolitical uncertainty. This slow burn is arguably more insidious, as it chips away at optimism over months, not days, and makes recovery harder to spark.

Main Street Feels the Pain

The consequences of collapsing confidence are real and immediate for Main Street businesses and households. When optimism fades, discretionary spending is the first to go—families delay big purchases, cut back on dining out, and skip non-essentials. For small and medium-sized businesses, this means fewer customers, lower sales, and greater uncertainty about the future.

Rising costs from inflation and tariffs squeeze margins even further, making it tough for businesses to invest or hire. Households, meanwhile, often respond by saving more as a precaution, which, while prudent individually, can further dampen economic activity when multiplied across millions of families.

The cycle is clear: pessimism breeds caution, caution slows growth, and the gloom deepens. Breaking free will require more than just improved numbers—it will take a meaningful shift in the factors fueling Main Street’s anxiety.