The latest Conference Board Consumer Confidence report points to an important inflection point: consumer expectations are starting to align with improving economic fundamentals. With inflation running below what many households still anticipate and growth remaining resilient, consumer confidence is beginning to firm.
The headline confidence index rose to 91.2, beating expectations. More important than the top-line number was the movement underneath it. The Expectations component — how Americans view the next six months — posted a solid gain. That is typically where economic recoveries take root. Expectations improve before spending accelerates.
One figure, however, deserves closer scrutiny: consumers still estimate inflation over the next 12 months at 4.4 percent.
Actual inflation is running considerably lower than that.
This gap between perception and reality is economically significant. It tells us that inflation expectations remain anchored to the shock of the prior price surge rather than today’s data. Households experienced a sharp and painful run-up in food, rent, energy, and other essentials. Even as the rate of price increases has moderated, the psychological imprint of that episode remains.
But expectation gaps do not persist indefinitely.
When realized inflation continues to come in below what consumers expect, perceptions adjust. As expectations move down toward actual inflation, households begin to feel an improvement in purchasing power. The sense of constant price acceleration fades. That shift can materially improve confidence and unlock deferred spending.
In that sense, today’s elevated inflation expectations are not a signal of renewed inflation risk. They are a lagging indicator of past trauma. As perception catches up to data, consumer confidence has room to strengthen further.
However, consumer confidence does not exist in a vacuum. It is shaped by data — but it is also shaped by messaging.
And right now, Democrats running hard to retake the House are flooding the zone with a singular narrative: the economy is failing, tariffs are fueling inflation, and growth is on borrowed time. That spin is repeated daily across CNN, MSNBC and the legacy media.
The problem is that the data do not support the claim that tariffs are driving today’s price pressures. Nothing in the current CPI, PCE, or goods-price breakdown shows tariff pass-through creating broad-based inflation.
The inflation surge began well before the most recent Trump tariffs. It was driven by the Biden administration’s excess fiscal stimulus and Fed Chair Jay Powell’s loose monetary policy accommodating Biden fiscal policy. It was further exacerbated by supply-chain dislocations and Biden-induced energy shocks.
With the coming of Donald Trump and Trumpnomics, however, goods inflation has cooled markedly, energy prices have stabilized, shipping costs have normalized, and supply chains have largely untangled. If tariffs were the primary driver, we would expect to see renewed acceleration in core goods prices. We do not. Yet the Democrats continue to wave the bloody tariff shirt.
And that is where politics crosses into economics.
Consumer confidence is not just a survey statistic; it is a behavioral driver. If households are convinced that prices will surge again or that growth is about to stall, they pull back. They delay purchases. They trim discretionary spending. Businesses, sensing softer demand, slow hiring or investment. Growth is less than it would otherwise be.
That is how messaging can suppress spending. And because consumption accounts for roughly two-thirds of GDP, suppressing confidence for political gain is no small matter. Nor is it good for the country.
The encouraging reality in this report is that forward-looking confidence is improving despite inflation expectations that remain above realized inflation. That divergence suggests room for further gains as expectations converge with reality.
Inflation is lower than consumers currently believe. Growth remains intact. Labor markets are steady. As those fundamentals persist, consumer confidence should continue to recalibrate upward.
When it does, spending — and even stronger economic momentum — will follow.
