U.S. consumer and business sentiment has sharply declined, sparking concerns about an impending slowdown, even as key economic indicators remain resilient, according to CoBank’s Knowledge Exchange’s latest Quarterly report
Surveys show some of the steepest declines in optimism since the 1980s. The University of Michigan’s Consumer Sentiment Index plunged 17 points between December and March, reaching 57, well below its long-term average of 85. Long-term inflation expectations are now at their highest level since 1995. Similarly, The Conference Board’s consumer and business expectations index fell to a 12-year low, while the Philadelphia Fed reported the largest two-month drop in new order expectations in its 58-year history.
Despite the significant decline in sentiment, the economy is demonstrating resilience. With unemployment at 4.1%, robust income growth and a 2.4% GDP, the economy is holding steady, at least for the time being.
“The next set of hard data from retail sales and consumer spending should begin to provide some guidance as to which way the economy is heading,” said Rob Fox, director of CoBank’s Knowledge Exchange.
The report highlights that historically, drops in sentiment have led to reduced consumer spending within three to five months. This is a potential warning sign, as consumer spending drives nearly 70% of U.S. economic activity.
Animal protein
“The intersection of increasing production costs and the consumer’s willingness and ability to pay has been front of mind for livestock and poultry producers,” said Brian Earnest, CoBank’s lead economist for animal protein.
According to CoBank, the U.S. animal protein sector entered 2025 with strong producer values and a surprisingly resilient consumer appetite, though growth expectations remain measured. In 2024, per-capita meat and poultry consumption increased 1.3% year-over-year to 228 pounds, despite elevated prices, indicating steady demand heading into the grilling season.
“Consumers have shown remarkable willingness to absorb higher costs, especially as spending shifted back toward food-at-home in the second half of 2024,” CoBank noted, citing USDA data that revealed a 2% increase in inflation-adjusted grocery spending.
On the production side, lower feed costs offered some relief to livestock and poultry producers, even as non-feed expenses stayed elevated. Corn, hay and soybean prices all posted double-digit year-over-year declines, supporting improved margins for feeders and processors across the protein complex. CoBank reported U.S. beef production was up 1.1% year-to-date through March, with record cattle weights and surging feeder cattle prices reflecting tighter supplies and cautious herd management.
“The all-fresh retail beef price hit a record $8.32 per pound in February,” CoBank highlighted, as limited cow slaughter continues to tighten the lean beef supply, driving both prices higher and imports from Australia and Brazil.
Meanwhile, pork producers have seen improving fundamentals, with export demand and domestic consumption pushing prices higher. The CME Lean Hog Index started 2025 more than 30% above the prior year, while pork cutout values rose 6% year over year in the first quarter.
“Producer margins turned positive for 11 straight months through February,” CoBank reported, referencing Iowa State University data, though last year’s gains still haven’t erased the sharp losses of 2023.
Food and beverage
According to CoBank, the food and beverage sector is feeling the strain of shifting consumer habits and economic uncertainty. Major manufacturers, including General Mills, Kraft Heinz, Campbell’s and Conagra, have all lowered their sales and earnings expectations as consumers reduce their grocery spending. Even Walmart signaled softer growth ahead. A growing preference for private label products is compounding the challenge, with 45% of shoppers sticking with store brands after making the switch.
CoBank also noted that consumers remain highly price-sensitive, both in grocery stores and restaurants, as tariff concerns and potential cuts to Supplemental Nutrition Assistance Program benefits loom large. Surveys show 82% of Americans expect tariffs to drive prices higher, prompting many to shift toward lower-cost alternatives or reduce non-essential purchases altogether.
Tariffs
Fox noted that trade policy is another looming concern. Most of the focus so far has been on the short-term impact of new tariffs, with economists essentially agreeing that the effects will be negative for 2025 inflation, GDP and job growth. However, the scale of these effects remains uncertain, and recession odds now stand at a coin flip. What began as a presumed negotiating tactic is increasingly seen as a longer-term shift toward tariff-driven protectionism aimed at reshoring U.S. manufacturing.
While national security arguments for boosting domestic industry are hard to dispute, CoBank notes that “unpredictable tariff policy isn’t the way to achieve that,” as businesses are reluctant to commit significant investments without stability and clear, consistent communication from policymakers. Regardless of whether tariffs remain or are removed, the real long-term risk may be the erosion of global trust in U.S. trade and economic policy. — Charles Wallace, WLJ contributing editor
