Consumption, which contributes about 70% of the US GDP, can slow down when people are pessimistic about the economy during Mr. Trump’s term.
US consumers and businesses are felt worried about inflation when President Donald Trump repeatedly refers to huge import tax policies. This raises the question of whether the pessimistic psychological psychological psychological pessimism of the people pulled out the spending, recruitment and future of the largest economy in the world.
“Mr. Trump’s changes in the beginning of the term are unprecedented. This makes people insecure. If the belief continues to decline for another 3 months and when consumers really stop spending, the game will end,” Mark Zandi – Chief Economy at Moody’s said above above CNN.
Many recent surveys show that Americans are concerned about inflation because Trump’s import tax. The February consumer confidence index dropped most sharply since August 2021. National Federation of Independent Business – Association of small businesses in the US – also published in January, the 3rd highest -high instability since 1973.
People shopping in a commercial center in Pennsylvania (USA). Image: Reuters
The pessimism is most evident at Wall Street. Fear & Greed Index’s index CNN Monitoring behavior in the US stock market shows that investors have turned into a “extremely scared” state.
Before increasing in February 26, S&P 500 and Nasdaq Composite fell 4 consecutive sessions. All three key indicators of the securities, including DJia, went down compared to the first day Mr. Trump took office. Since the beginning of the year, Nasdaq Composite has lost more than 1%.
In the latest survey of Reuters/Ipsosthe proportion of Americans think that the economy is going in the wrong direction to 53%, 10% higher than the poll on 24-26/1. The public support level for Mr. Trump’s economic management also decreased from 43% to 39%.
The pessimism does not always decline consumers. In June 2022, when consumer beliefs in the world’s largest economy were low to record the highest inflation for 40 years, Americans still spend vibrant months later.
However, this pessimistic psychology can put pressure on the economy if it lasts. “It is too early to conclude whether the recession has appeared. But this time is quite special. The instability is upset psychologically and causing consumers to falter,” Zandi said.
Consumption contributes about 70% of US GDP. Retail sales also account for about a third of the total spending. Therefore, if Americans still consume strongly, recession can hardly form.
Although the signs of reducing expenditure have not appeared, the latest retail data is not optimistic. The US Department of Commerce said that January retail sales decreased by 0.9% compared to the previous month. This is the first time of this index has decreased since August 2024. Economists believe that the cause may be cold weather, making people afraid to go shopping.
Last week, the largest retailer in the United States Walmart warned that this year’s revenue growth and profit could slow down. Many years of inflation and interest at a high level, many consumers have difficulty, especially the low income group.
“I think the economy is weakened. The instability created by the government makes businesses slow down,” Tony James – former leader of the property management segment at Blackstone Investment Company said above CNBC. In addition to the decline in consumer beliefs, James also pointed out that the overdue repayment situation is increasing.
However, analysts still believe that US consumers will promote the economy in the next few months. “The factors that are more closely related to consumption are income and employment,” Robert Frick – an economist at Navy Federal Credit Union. He did not realize the possibility of this year’s degradation of the US.
The job market is still stable. Unemployment rate is low, 4%. The hour income is still increasing, according to the data of the US Department of Labor. These factors will be a solid pedestal for spending.
However, civil servant dismissal can cause consumers to reduce spending somewhat. “People will worry about being fired,” Frick explained.
The Trump administration, with the support of the Government Performance Committee (DOGE) in charge of billionaire Elon Musk, is launching a civil servant cut in the US. The country currently has more than 3 million civil servants, accounting for nearly 2% of workers in the US.
Even so, on CNNexperts believe that these dismissal difficulties have greatly impacted the US labor market. “We forecast that the unemployment rate increased slightly this year, but generally still stable,” said Grace Zwemmer, a senior economist at Oxford Economics.
In 2022, a series of organizations and economists once predicted that the US would almost certainly fall into recession. However, this scenario did not happen. The war against inflation of the US Federal Reserve (Fed) caused its growth to slow down, but not as strong as the initial concern. Last year, the US grew by 2.8%, equivalent to 2023.