Consumer Confidence Drops 27% Since May 2024

Recent volatility in the economy and the stock market, driven by tariffs and layoffs, has led to a plunge in consumer confidence. Consumers feel 27% less confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index.

"The 27% 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," said Chip Lupo, WalletHub analyst. "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."

This is the sharpest yearly drop in consumer confidence recorded since December 2020, and the consumer sentiment is now at its fifth-lowest point in the past five years. The magnitude of the decline is due partly to May 2024 having been the most optimistic month for consumers' financial outlook.

"Uncertainty is the primary driver behind the decline in consumer confidence. The debate surrounding the administration's trade war has had a chilling impact on the economic outlook of consumers," said H. Shelton Weeks, professor at Florida Gulf Coast University. "Throughout this debate, economists have warned of rising prices and slowing economic growth. The media coverage has been extensive, and consumer confidence, predictably, has taken a significant hit."

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.

"Consumer confidence will always go down in times of uncertainty. The current political situation makes it difficult to predict decisions which are being made and thus predict the consequences of those decisions," said Kimberly A. Gaither, provost, vice president for academic affairs, and professor at Culver-Stockton College. "The U.S. relationship with other countries is also shifting, and the U.S. has a strong dependence on goods from other countries. The cost of those goods in the future is very uncertain."

Key stats

• Decreasing interest in auto purchases. The share of consumers who expect to buy a car in the next six months is more than 32% lower in May compared to May 2024. This is the highest drop in auto purchase interest on record since December 2020.
• Real estate popularity drops. Home-buying interest among consumers decreased by nearly 30% in May compared to last year, marking the largest decrease recorded since December 2020.
• Large purchases are not a priority. In May, consumers' likelihood of making a large purchase in the next six months is almost 22% lower than last year, the sharpest drop in consumers' interest in large purchases since December 2020.
• Weaker sense of job security. People's confidence in having a job in the next six months is more than 16% lower in May compared to last year. This marks the steepest decline in job security sentiment since December 2020.
• Decrease in optimism. In May, consumers' optimism about whether their finances will improve in the next six months is almost 14% lower compared to last year. This represents the most significant drop in financial outlook sentiment since December 2020.

Click here for complete WalletHub Economic Index results.