Posted originally on Mar 17, 2025 by Martin Armstrong 

Tariffs are on, tariffs are off, tariffs are delayed—the confusion surrounding world trade has Americans on edge. The University of Michigan’s sentiment survey for March shows a massive plunge in consumer confidence  “across all groups by age, education, income, wealth, political affiliations, and geographic regions.”

Consumer sentiment dipped 11% for the month to 57,9, marking the third consecutive monthly decline and the lowest level since historically high inflation in 2022. Americans believe inflation will soon rise to 4.9%, an increase from the 4.3% predicted last month.

“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” Joanne Hsu, the survey’s director, said in a release.

Spending patterns mimic this drop in confidence as consumer spending declined in January 2025 for the first time in two years. There is far too much uncertainty in terms of policy, but worse, there is extreme uncertainty surrounding the current cost of living that does not seem to be easing for the average person.

We are in a period of stagflation. During periods of stagflation, the prices of goods and services increase while buying power decreases. Consumers end up spending more on less. Some people have a tough time understanding that we are in a massive deflationary spiral; they think that rising prices mean inflation and not deflation. Then, they mistake stagflation for deflation and wonder why people are spending more on less. They only see prices, not disposable income, and indeed not economic growth and unemployment.

Most expect to see higher prices with tariffs. Then the lack of confidence becomes a self-fulfilling prophecy where we do not see growth as businesses and consumers refrain from investing. It is all about CONFIDENCE.