The University of Michigan’s March consumer confidence survey showed a rapid decrease in consumer confidence amid historically high inflation expectations. Economists say this could be a bad omen for the United States economy.

The Report: The report, released Friday, showed an 11% month-over-month drop and a 22% decline from December 2024. Meanwhile, inflation expectations jumped from 4.3% in February to 4.9% in March, the highest reading since November 2022.

The survey showed some signs of political polarization, though Republicans, Democrats and Independents all reported declines in their economic expectations.

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Economist Reactions: Experts didn’t sugarcoat the results of the survey, calling them a serious warning sign for the U.S. economy.

"This is an horrific report," Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, told the New York Times. "Elevated economic policy uncertainty and the sharp drop in stock prices have greatly undermined consumers' confidence."

Stanford professor Neale Mahoney called stagflation expectations “scary” in a post on X.

Diane Swonk, chief economist for KPMG, had similar worries.

“Sadly, the consumer sentiment figures have a stagflation vibe, which poses a challenge to the Federal Reserve. The current tariffs we saw are so large and staggered that they hit both margins and prices,” Swonk posted on X.

Bill Adams, Chief Economist for Comerica Bank, similarly expressed concern about whether high inflation expectations would keep the Federal Reserve from cutting interest rates.

“This is bad news. People who fear losing jobs pull back on discretionary spending,” Adams said Friday. “Don't hold your breath for the Fed to ride to the rescue if spending falls as inflation expectations are soaring.”

Retailer Warns Pressure: On Tuesday, Kohl’s Corp. (NYSE:KSS) warned of a challenging outlook for fiscal 2025, expecting sales to decline by 5% to 7%, citing “constrained” shoppers.

CEO Ashley Buchanan said much of Kohl’s customer base is under pressure from rising costs in rent, housing, and groceries, noting, “If you’re making less than 50 [thousand], that consumer is pretty constrained from a discretionary standpoint,” and adding that value-seeking behavior will “probably expand… across income cohorts over the next probably three or four months.”

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