US Consumer Confidence Falls to Lowest Level in Over a Decade

U.S. consumer confidence dropped sharply in January, reaching its lowest level in more than eleven years. The decline reflects growing concerns about the labor market and persistently high prices, factors that may push households to become more cautious with their spending.

The decrease in confidence was broad-based and affected consumers across political affiliations, with independents showing the most pessimism. The downturn has intensified pressure on the current administration, as critics point to rising living costs and trade policies as contributors to the affordability challenges faced by many households.

Although consumer confidence does not always move in line with actual spending, economists are paying closer attention to the fact that negative sentiment is now coupled with worsening views of the job market. Perceptions of job availability weakened significantly, reaching levels not seen in nearly five years. This has raised concerns about a potential slowdown in consumer spending in the coming months.

Despite the gloomy sentiment, most analysts do not expect the Federal Reserve to change its monetary policy in response. Interest rates are widely expected to remain unchanged, even as consumer expectations have fallen to a nine-month low. Some economists believe this could signal softer spending ahead, especially given stagnant real incomes and very low personal savings rates.

The consumer confidence index recorded a notable monthly decline, falling well below economists’ forecasts and marking its weakest reading since 2014. This drop contrasts with other recent surveys that showed a more moderate improvement in sentiment, highlighting mixed signals within the broader economic outlook.

Confidence fell most sharply among consumers aged 35 and over, as well as among both lower-income and higher-income households. While higher-income groups have been a key driver of recent spending strength, the decline in their confidence suggests that even these households may begin to pull back.

Concerns about inflation, fuel costs, food prices, tariffs, and broader political and labor market issues were frequently cited by respondents. References to health insurance costs and geopolitical tensions also increased.

Financial markets largely brushed off the negative data. U.S. stock markets traded higher, the dollar weakened against other major currencies, and government bond yields showed mixed movements.

Labor market perceptions continued to deteriorate, with fewer consumers describing jobs as plentiful and more saying they were hard to find. This shift increases the risk of a gradual rise in the unemployment rate, as businesses remain cautious about hiring amid trade uncertainty, immigration restrictions, and increased investment in automation and artificial intelligence.

Looking ahead, fewer consumers plan to make major purchases, travel, or buy homes in the next six months. While recent policy measures aim to improve housing affordability, economists believe their impact will be limited without a meaningful increase in housing supply. High construction costs, labor shortages, and tight inventory continue to keep house prices elevated, with further price growth expected over the course of the year.