Consumer sentiment surveys from The Conference Board and the University of Michigan have been dismal of late, as households fear a resurgence in inflation from President Donald Trump’s tariffs. Companies have warned of higher prices and less demand, coinciding with economists’ forecasts that suggest a risk of stagflation and rising odds of a recession. Consumers’ expectations for inflation over the coming year increased to the highest level in two years. A similar metric from the Michigan survey climbed in early March to the highest since 2022.

While the sentiment readings and other “soft data” like surveys of businesses and homebuilders have been decidedly downbeat in recent weeks, “hard data” in government statistics suggests the economy is on solid footing. Unemployment remains low, and manufacturing activity picked up in February, while another report showed inflation eased last month.

“Consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” Stephanie Guichard, senior economist at the Conference Board, said in a statement. According to respondents to the Conference Board survey, expectations for their own future finances declined to the lowest level since July 2022. The share of respondents anticipating a recession held at a nine-month high.

The big question for economists and Federal Reserve policymakers now is whether the weak sentiment trend will translate into observable behavior, like a marked pullback in spending. Consumers are also contending with persistent inflation, high borrowing costs, and a softer job market, all of which are weighing on household finances.

Buying conditions for big-ticket items like appliances and electronics picked up in March, which may reflect plans to get ahead of tariffs. Data on February inflation-adjusted spending on goods and services spending is due Friday.

Federal Reserve officials held their benchmark interest rate steady for a second straight meeting last week as they wait for more clarity about the impact of Trump’s policies. The share of consumers expecting higher interest rates in the year ahead rose to its largest in almost a year, according to the confidence report. The share of consumers who said jobs are plentiful held at 33.6 percent. The share saying jobs are hard to get fell slightly. The difference between these two—a metric closely followed by economists to gauge the job market—ticked up to 17.9 percent.

Separate data Tuesday showed that sales of new homes in the U.S. bounced back slightly last month after a rocky start to 2025 as homebuilders benefited from better weather.

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