By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence plunged to the lowest level in more than four years in March, with households fearing a recession in the future and higher inflation because of tariffs.

The Conference Board said on Tuesday that write-in responses to the survey showed “worries about the impact of trade policies and tariffs in particular are on the rise,” adding “there were also more references than usual to economic and policy uncertainty.”

The survey’s measure of future expectations hit a 12-year low and breached a level associated with an economic downturn.

President Donald Trump’s on-and-off again tariffs have been panned by economists for sowing confusion and uncertainty that they said was making it challenging for businesses to plan ahead, to the detriment of the economy. Trump on Monday indicated that not all of his threatened duties would be imposed on April 2 and some countries may get breaks, but at the same time said tariffs on imported automobiles were coming soon.

“Consumers are rattled,” said Carl Weinberg, chief economist at High Frequency Economics. “At great personal risk, we will opine that the chaos in Washington has something to do with this. The decline in consumer sentiment since the November election can no longer be written off as a coincidence.”

The Conference Board’s consumer confidence index tumbled 7.2 points to 92.9 this month, the lowest level since January 2021. Economists polled by Reuters had forecast the index sliding to 94.0. The fourth straight monthly decline in confidence mirrored a similar deterioration in the University of Michigan’s consumer sentiment measure, which has also erased all the gains notched in the aftermath of Trump’s election victory in November.

The drop in confidence was driven by consumers over 55 years old. Morale in the 35-55 year age cohort also worsened. But confidence rose slightly among consumers under 35 years. Confidence slumped across income groups, with the exception of households earning more than $125,000 a year. Consumers had over the past few months been generally upbeat about future income.

“Consumers’ optimism about future income … largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” said Stephanie Guichard, senior economist, Global Indicators, at the Conference Board.

RISING RECESSION WORRIES

The survey’s expectations index, based on consumers’ short-term outlook for income, business, and labor market conditions, dropped 9.6 points to 65.2 – the lowest level since March 2013 and well below the threshold of 80 that usually signals a recession ahead. The share of consumers anticipating a recession over the next 12 months held steady at a nine-month high.

Despite the gloom, consumers showed little sign they planned to dramatically curtail spending for now. There was a slight decline in the share planning to buy automobiles over the next six months.

Many intended to purchase television sets and household appliances like refrigerators, microwaves and washing machines, which the Conference Board said was likely pre-emptive buying before tariffs lead to price increases.

There was also a rise in the share planning to go on vacation and an uptick in those planning to buy a home.

Mortgage rates have declined in tandem with the benchmark 10-year Treasury yield amid the economic uncertainty. That is helping to stimulate home sales, though the darkening clouds over the economy could sideline potential buyers. New home sales rebounded 1.8% to a seasonally adjusted annual rate of 676,000 units in February, the Commerce Department’s Census Bureau said.

“Headwinds like weak homebuying sentiment and heightened economic uncertainty from tariffs could limit any growth in coming months,” said Alice Zheng, an economist at Citigroup.

Stocks on Wall Street were mixed. The dollar eased against a basket of currencies. U.S. Treasury yields fell.

Consumers’ median 12-month inflation expectations jumped to 5.1%, the highest since May 2023, from 4.7% last month. Federal Reserve Chair Jerome Powell last week shrugged off the recent surge in inflation expectations.

“No doubt this will be dismissed as a short-term inflation expectations indicator by the Fed, but the long run is formed from a sequence of short runs and the sharp move higher since December is looking troubling,” said Conrad DeQuadros, senior economic advisor at Brean Capital. “It did well in April and May of 2020 in predicting higher inflation even as core inflation on a year-over-year basis was falling.”

While the relationship between confidence and spending is weak, economists said the continued deterioration should not be ignored, adding that it aligned with their forecasts for slow economic growth and high inflation this year.

The U.S. central bank left interest rates unchanged last week, though policymakers indicated they expected to reduce borrowing costs twice this year. Fed officials downgraded their 2025 gross domestic product growth estimate to 1.7% from the 2.1% projected in December. They forecast core inflation at 2.8% at year-end, revised up from 2.5% previously.

The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, climbed to 17.9 from 17.6 in February.

This measure correlates to the unemployment rate in the Labor Department’s monthly employment report. Economists viewed the labor market differential as consistent with the jobless rate holding steady at 4.1% in March.

“Consumers were already due for a cool down in early 2025 after a steamy end to last year, but these figures raise the risk of a more significant pause in outlays,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

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