American consumers are growing increasingly pessimistic about the state of the economy, with surveys reflecting a notable dip in confidence. Although some Wall Street economists are forecasting a potential recession in the United States this year, most current economic indicators have not yet confirmed this trajectory, raising concerns about when this gloomy public sentiment might begin to impact actual economic growth.
Several economists believe the pivotal moment could occur during the summer months. According to Goldman Sachs US economist Emanuel Abecasis, “We will likely see continued softness in the survey data before the hard data start to weaken around mid-to-late summer, at which point higher prices, weaker spending, and slower hiring could start to emerge in the official statistics.”
Goldman Sachs analyzed 45 distinct economic metrics and concluded that, historically, it takes approximately four months for significant weakening in economic data to emerge following a key disruptive event. In the current case, that event is President Donald Trump raising the US’s effective tariff rate to levels not seen in a hundred years. Many analysts expect this move to spur inflation and dampen economic growth.
The Goldman Sachs team estimates there is a 45 percent chance of the US entering a recession within the next year—a much higher probability than the typical 15 percent seen during any given year. Abecasis noted, “It is still too early to draw strong conclusions from the limited data we have so far, and we will continue to watch for indications of slower growth in the coming months.”
So far, the economic trend seems to be mirroring past recessions triggered by specific events, such as the 1973 oil crisis and the interest rate-driven downturn of 1980. In such scenarios, declines in survey data typically precede drops in tangible economic activity. Presently, consumer sentiment as measured by the University of Michigan’s index is hovering near levels last seen in 1978.
Concrete economic indicators, often referred to as hard data, have not yet shown sustained weakness. In fact, March data suggested a strong showing, with retail sales posting their most significant monthly jump in nearly two years. Likewise, durable goods orders rose sharply by 9.2 percent, far surpassing the 2 percent increase that economists had anticipated. This surge was largely driven by a massive increase in aircraft orders, one of the largest on record.
Some economists argue that this data does not reflect robust economic strength but rather a preemptive move by consumers and businesses who are racing to buy products before Trump’s tariffs make them more expensive. “The thing with any pull forward of demand is that the drop thereafter can be extremely painful, because if you’ve ordered as a business, you know, half of your inventory in order to stock up, then you’re not going to be reordering the following month,” said EY chief economist Gregory Daco. “So you’ve pulled forward demand, but that leads to a significant drop off in the next time period.”
Daco cited vehicle sales as an example of this behavior. Auto sales surged by 5.3 percent ahead of the anticipated tariff hikes. But, as Daco noted, “people aren’t going to buy a car again” the following month. He expects the impact of this pull-forward effect to become more visible in June, once economic reports for May are released.
However, Daco and other experts say signs of a slowdown are already surfacing. According to RSM chief economist Joe Brusuelas, activity is declining as early as April. He highlighted a significant drop in shipment volumes at the Port of Los Angeles, where incoming traffic is forecast to fall by 44 percent through May 10.
“In June, what that means is there’ll be less goods on the shelves,” Brusuelas explained. “Less goods equals higher prices. At a time when inflation goes up, that means less disposable income, less demand.”
Brusuelas also noted that while some key indicators such as weekly unemployment claims haven’t risen yet, they could soon follow. As incoming orders decline, businesses may seek ways to cut costs, which often involves reducing their workforce.
“The economy is going to slow,” Brusuelas predicted. “At best, it’s going to grind to a halt. At worst, we’re going to be in a recession. I think we have a very mild garden-variety recession, something that goes on for six to nine months.”
Despite the concerns, some signs of strength still exist in the economy. But the current situation suggests that many businesses and consumers are reacting in anticipation of future economic challenges, rather than from actual deterioration in current conditions. This preemptive action—while logical in the face of expected tariffs—could lead to a sharp drop in demand once the initial burst of activity fades.
Economists argue that the current divergence between soft and hard data is typical of event-driven slowdowns. In past cases, the lead time between the onset of pessimistic sentiment and actual declines in economic output has varied, but the general pattern remains the same: a significant shock leads to immediate changes in expectations, followed by a gradual manifestation in measurable activity.
The uncertainty surrounding when and how this economic pessimism will impact real growth remains a key focus for economists. As Abecasis emphasized, more data is needed before drawing firm conclusions. But with inflation pressures looming and the effects of trade policy changes beginning to ripple through the economy, many believe the summer could mark a turning point.
In the meantime, analysts are keeping a close watch on various economic signals, including consumer behavior, business investment patterns, employment trends, and inflation metrics. The upcoming months will likely be critical in determining whether the US can navigate through this uncertain phase without slipping into a recession.
As survey data continues to indicate anxiety and forward-looking indicators point to caution among both consumers and businesses, the economy could be heading toward a significant inflection point. Whether that leads to a full-blown recession or a period of stagnation remains to be seen, but economists are increasingly sounding the alarm that the warning signs are aligning.
