Money Matters - Decrease in Consumer Sentiment

 Recent volatility in the economy and the stock market, driven by tariffs and mass layoffs, has led to a plunge in consumer confidence. In fact, consumers feel nearly 8% less confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index, released today. This drop is so severe that consumer sentiment is now at its fourth-lowest point in the past five years.

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 over 13% lower in April 2025, compared to last year.
   
• Real estate popularity drop: Home-buying interest among consumers decreased by over 10% in April 2025 compared to last year.
   
• Large purchases are not a priority: In April 2025, consumers’ likelihood of making a large purchase in the next six months is nearly 10% lower, compared to last year.
   
• Decrease in debt-reduction confidence: The share of consumers who expect to have less debt after the next six months is roughly 4% lower in April 2025 compared to last year.

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


“The nearly 8% 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
 
Why is consumer confidence going down overall?

“Markets, which are made up of people, like predictability and stability. The current market volatility reflects the uncertainty of the people about their household’s expected financial situation. Tariffs are likely to impact costs of goods and inflation, which in turn impacts the capability of savings and retirement accounts.”
Brad G. Scott, Ph.D. – Professor, Webster University

“As you know, consumer confidence is measuring the overall outlook of the general public as to their perceptions of the future based on their conditions of the present. While economic indicators seem to point to good economic growth and falling inflation, the broad scope of the American public has not experienced what the indicators suggest. Further, while the rate of inflation has slowed, the present consequences of four years of high inflation remains a constant threat to the economic security of most families. To further complicate the general outlook, wage growth has not kept pace with the inflation rate increases. Until wage growth rates surpass the inflation rate and put the inflated cost of living in the rear view mirror, the outlook for the future remains murky for most Americans.”
Grover Plunkett – Assistant Professor, Faulkner University


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

“Some households and businesses, in a defensive mechanism, have accelerated purchases of items, like vehicles, they may need in the next year to get ahead of tariffs and possible supply line disruptions caused by a possible trade war with other nations. Decisions regarding retirement and savings accounts depend heavily on the time horizon of the individual, with those with shorter-terms moving towards cash and safer investments. Some businesses may stand to benefit, while others will see costs rise and supply line issues.”
Brad G. Scott, Ph.D. – Professor, Webster University


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

“Individual households should assess their upcoming annual needs and see if there are any large item purchases they should make before further disruptions, but avoid blind panic buying. They should make sure their emergency fund is sufficiently funded, and make sure retirement accounts reflect the diversification desired.”
Brad G. Scott, Ph.D. – Professor, Webster University 

“Jamie Dimon recently recommended that individuals should invest in farm land or housing units to protect future finances. There is a growing shortage of both. The value of both have outpaced inflation and have expected future growth potential especially during uncertainty in the marketplace. Other traditional safe havens have been precious metals. Both gold and silver have seen a great deal of value appreciation in the last year. How much more appreciative value remains in the short term is difficult to predict. With estimates of expected Foreign Direct Investment ranging from $4 Trillion to $14 Trillion over the next ten years, the American manufacturing sector may be a place to consider investment, especially in AI and chip technologies.”
Grover Plunkett – Assistant Professor, Faulkner University