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 over 9% less confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index, released this week. While this is the seventh-sharpest yearly drop in consumer confidence recorded since December 2020, consumer sentiment is only at its 18th-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
- Real estate popularity decline: Home-buying interest among consumers decreased by almost 18% in October 2025 compared to last year, marking the fourth-sharpest decline in interest on record since December 2020.
- Decreasing interest in auto purchases: The share of consumers who expect to buy a car in the next six months is nearly 17% lower in October 2025 compared to last year. This is the fourth-highest drop in auto interest recorded since December 2020.
- Weaker sense of job security: People’s confidence in having a job in the next six months is almost 10% lower in October 2025 compared to last year. This is the second-highest drop in the level of job security sentiment registered since December 2020.
- Less new employment opportunities: The share of consumers who feel new employment opportunities are “abundant” is over 7% lower in October 2025 compared to last year.
Large purchases are not a priority: In October 2025, consumers’ likelihood of making a large purchase in the next six months is roughly 6% lower than it was last year.
The complete WalletHub Economic Index results can be found at:
https://wallethub.com/edu/
“The 9% 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?
“A careful analysis of the granular survey data from the University of Michigan’s Consumer Sentiment Index pinpoints the root causes of the overall decline in consumer confidence. First, the partisan gap in economic perceptions has reached an unprecedented level. As of October 2025, the University of Michigan's Consumer Sentiment Index recorded a gap of 61.9 points between Republicans (98.2) and Democrats (36.3), the largest divide since the survey’s consumer political affiliation data became available in late 2006. Second, consumers continue to be burdened by elevated price levels. Although the inflation rate has fallen to below 3% since its peak of 9.1% in April 2022, the cumulative effect has resulted in persistently higher prices, worsening perception of personal finances for a large portion of American households. Third, the benefits of a record equity market and AI boom are not felt equally, resulting in a ‘K-shaped’ recovery. While high-income groups reap the rewards of a stock market boom, lower-income groups feel squeezed by high consumer prices and heavy interest burden on consumer debt. Finally, broad uncertainty acts as a negative drag, as concerns over tariff policy, geopolitical risks, government shutdowns, and high borrowing costs collectively eroded consumer confidence.”
Xiaoqing Eleanor Xu, Ph.D., CFA – Professor; Co-Director, Master of Financial Technology and Analytics, Seton Hall University
“Consumers feel confident when they have a job that pays enough for them to afford a nice home, car and schools for their family – AND when they feel confident that nothing will change in that…equation. Unfortunately, there are a number of stresses that are eroding key links to a happy life… Job stress: Consumers are confident when they can find a job that pays well and that they feel will provide years of steady employment. The economic turmoil brought on by Trump Administration tariff taxes have increased the cost of production in US companies. As employers face increased costs due to those tariff taxes, they are less likely to hire more people and give raises… Health Insurance stress: …social safety net cuts makes health insurance less affordable; which amplifies the downside of job loss… Housing stress: Homeowners are now faced with steeply declining prices, meaning they feel like their home is worth less. Since homes are the main source of wealth for most US families, this makes people feel poorer. And that means they spend less… Consumer debt. Credit card and automobile debt levels are at historic levels and delinquencies are rising. This is troubling as these are early warnings of deeper levels of debt… Inflation due to tariff taxes: Tariffs are taxes that are ultimately borne by consumers… Inflation makes people feel poorer; especially when wages are not increasing to keep pace… With all of these stresses, consumers are worried and do not have a sense that the economy is moving in a good direction. As a result, consumers tend to save more in these situations.”
Patrick Bernet - Associate Professor, Florida Atlantic University
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