Money Matters - Drop in Consumer Confidence

Consumers feel around 13% less confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index, released today.

The WalletHub Economic Index is based on a monthly survey that evaluates economic prospects based on 10 components of consumer sentiment. These components revolve around how people feel about their finances, purchasing plans and employment opportunities.

Key Stats

• Decreasing interest in auto purchases: The share of consumers who expect to buy a car in the next six months is almost 23% lower in February 2025, compared to last year.
   
• Real estate popularity drop: In February 2025, home-buying interest among consumers decreased by over 21% compared to last year.
   
• Large purchases are not a priority: In February 2025, consumers’ likelihood of making a large purchase in the next six months is almost 17% lower than last year.
   
• Decrease in optimism: In February 2025, consumers’ optimism about whether their finances will improve in the next six months decreased by roughly 9% compared to last year.

 
The complete WalletHub Economic Index results can be found at https://wallethub.com/edu/wallethub-economic-index/91926



“The 13% decrease in consumer sentiment over the past year is a worrying sign that our economic recovery may be stalling, and it demonstrates that people are not optimistic about their financial future. People who have low financial confidence are likely to spend less money, make fewer large purchases, and pay down less debt than people with high confidence. As a result, when consumer sentiment experiences a significant decrease, that is negative for the economy.”
 
- Chip Lupo, WalletHub Analyst 


Expert Commentary
 
In what ways have the 2024 elections affected the financial decisions of households and businesses?

“General optimism has prompted an overall increase in consumer confidence (that may not be quantifiable in the short run with traditional indices) and business optimism. Overall, the implementation of tariffs will harm the economy but it will increase prices and employment in industries that are protected. In the near term, the significant negative effects on consumers and the economy are being overlooked by most decisionmakers.”
John J. Bethune – Professor, Barton College
 
“Polls have shown that there is a divergence between Republican-leaning voters and Democratic-leaning voters in their perceptions of the economy as a result of the election of November 2024 which resulted in the Republican control of the White House, the Senate and the House of Representatives. Republican-leaning voters felt encouraged by the election results and became more optimistic and confident about their economic future while Democratic-leaning voters felt exactly the opposite.”
Dr. Chen (Ken) Wu – Associate Professor, The University of Texas at Tyler

 
With the ongoing uncertainties in this economy, what steps can individuals take to protect their personal finances?

“As has always been the case, asset diversification and income maximization are the keys to improving an individual's long term economic well-being. Recently the new administration has recognized that the imposition of tariffs will cause overall prices to rise but this is being discounted by promoting the predicted rise in consumer incomes. Not a very comforting tradeoff for individuals on fixed incomes who have limited options going forward. I cannot see a win for these folks from a rise in the general level of prices.”
John J. Bethune – Professor, Barton College
 
“It is difficult to protect personal wealth in the face of unprecedented political uncertainties but generally speaking, people should have a financial plan with well-developed financial goals. They should stick to these plans and goals regardless of the wider political/economic developments. But in the face of the heightened uncertainty, they should perhaps have a somewhat larger emergency/rainy day fund and position their portfolio more defensively by either reducing their asset allocation to riskier assets such as stocks in favor of less risky assets such as bonds or cash or reducing their exposure to riskier stocks such as growth stocks in favor of less risky assets such as income or value stocks.”
Dr. Chen (Ken) Wu – Associate Professor, The University of Texas at Tyler