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U.S. consumer confidence took a notable hit in February, raising concerns about the consumer-driven economy. The Conference Board’s index fell to 98.3, down roughly 7 points from the prior month. This was the largest monthly decline since August 2021 and marked the third consecutive drop, bringing confidence to its lowest level since mid-2024. The February confidence decline raises the question: Is this the start of a broader economic slowdown?  Given consumer sentiment is often considered a leading indicator, it could be but we’re not willing to go out on a limb just yet.

Why is this important to follow? Weak consumer sentiment can have tangible effects on economic activity – when confidence erodes, consumers often become more cautious in their spending, especially on discretionary and big-ticket purchases. For example, the University of Michigan’s survey showed a 19% plunge in consumers’ assessments of buying conditions for durable goods – a sign that people are hesitating on major purchases like appliances or cars. Weakening sentiment can affect business behavior too. Said differently, if consumers signal they’re anxious and potentially curbing spending, businesses may preemptively scale back investment and expansion plans. It’s a feedback loop that should be monitored.