Consumers are feeling worse about their finances. How much does that tell us about the economy?

It’s been a little over a month now of all this back and forth on tariffs.

Ever since President Donald Trump first announced them in early April, businesses and consumers have gotten more anxious and pessimistic, according to pretty much every measure. That includes the New York Federal Reserve’s latest Survey of Consumer Expectations, which came out this morning. 

It finds people are feeling much worse about their own personal financial situations — both now, and looking ahead to the future — than they were in March.

But their expectations about inflation over the coming year haven’t changed much since then, in spite of constant headlines about how tariffs will raise prices.

Stop me if you’ve heard this story before: Consumers feel like the economy is bad, and getting worse, but the hard data shows it’s actually pretty solid. The unemployment rate is low, and consumer spending is strong.

Benjamin Page, a senior fellow at the Urban-Brookings Tax Policy Center, said that’s what we saw in 2022 and 2023 when inflation spiked.

“There was a huge amount of negativity in those surveys, and people just kept right on buying and the economy just kept chugging along,” said Page.

The recession that lots of economists expected never materialized. It turns out that what consumers say doesn’t always correspond to what they do. So why do we keep looking to what they say as if it were a magic eight ball?

“Official data is kind of backward looking and surveys like this on the mood and expectations of consumers, in theory, can provide some advance notice of people’s spending plans,” said Page.

Consumer spending, of course, is hugely important for the economy. Ted Rossman, senior industry analyst at Bankrate, said how consumers feel used to give us a better sense of where the economy was headed. 

“That really hasn’t been true the last five years or so. I mean, really, ever since the onset of the pandemic, consumer sentiment has been much gloomier than actual economic data,” said Rossman.

That seems to be the case right now.

“The fear is that tariffs are going to be the straw that broke the camel’s back,” said Rossman.

But Justin Wolfers, professor of economics and public policy at the University of Michigan, said it’s too soon to tell if this latest consumer expectations data is foreshadowing an actual downturn in the economy this time.

“Because so far we only have hard data for the period before Liberation Day,” said Wolfers. “If you want to see the effect of the Trump tariffs on the economy, you have to collect data from after the Trump tariffs.”

And, he said, we don’t have much of that yet.