Confidence Dips as More Consumers Anticipate Cash Shortages and Credit Crunch Concerns

The first few months of 2025 have produced more than a handful of unpredictable developments. For starters, Super Bowl favorites the Kansas City Chiefs didn’t win this year’s big game, which was the first time since the 2021 NFL season that the Chiefs concluded a campaign without football’s largest prize in tow.

On the political front, not many pundits foresaw the degree of influence that Elon Musk and the Department of Government Efficiency (DOGE) would have on President Donald Trump’s strategies in the early months of his second presidential term. But as of March 19, DOGE claims that its cost-savings activities — including canceling contracts and grants, selling assets, and reducing government workforces — have resulted in an estimated savings of $115 billion.

Saving money is also on the minds of many American consumers. A recent survey by the Federal Reserve Bank of New York reveals that more than one-third of respondents said they anticipate needing to come up with $2,000 to cover unexpected expenses in the near future. 

But the share of consumers who said they could come up with $2,000 to pay for an unexpected need within the next month declined to 62.7%. That percentage is the lowest figure reported by the Federal Reserve Bank of New York in nearly 10 years. Five years ago, 71.6% of respondents expressed confidence that they could come up with $2,000 to cover an unexpected expense.

Consumers are facing challenges in their household finances at the outset of 2025, and they don’t expect their situations to improve in the coming months.

“Consumers’ year-ahead expectations about their households’ financial situations deteriorated considerably in February,” the Federal Reserve Bank of New York said in comments accompanying the survey. “The share of households expecting a worse financial situation one year from now rose to 27.4 percent, its highest level since November 2023.”

Consumers who are short on savings can turn to lending products such as credit cards or personal loans to help them bridge the gap to brighter financial days. But the Fed survey details that many consumers fear that credit lifelines may soon be out of their reach. Almost 47% of respondents — the highest total since June 2024 — report that they anticipate obtaining credit to be more difficult a year from now than it is today.  

And 8.5% of survey respondents who said they have a need to borrow funds reported that they’ve refrained from applying for any type of credit product because they didn’t think lenders would approve their application. That percentage is the highest the Federal Reserve Bank of New York has observed since it started its survey in October 2013.

Meanwhile, reports of trade tariffs have rocked the equity markets in recent weeks, sending the S&P 500 into correction territory. Though inflation rates cooled slightly in 2024 after spiking in 2021 and 2022, they remain higher than they were in the years leading up to the pandemic.

This confluence of negative economic factors hasn’t gone unnoticed by American consumers. The University of Michigan’s Index of Consumer Sentiment dipped to 57.9 in March, representing a drop of more than 10% from the previous month’s sentiment figures.

“Sentiment has now fallen for three consecutive months and is currently down 22% from December 2024,” Joanne Hsu, the Director of the Surveys of Consumers and a Research Associate Professor at the University of Michigan, wrote in comments accompanying the sentiment figures.

“While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets,” Hsu wrote. “Long-run inflation expectations surged from 3.5% in February to 3.9% in March.”

Hsu noted that the rise in long-run inflation expectations observed in March’s data represents the most significant month-over-month increase since 1993. Year-ahead expectations for inflation rose to their highest level since November 2022.

One’s financial outlook may be influenced by how much confidence they have in their government’s ability to navigate macroeconomic pressures. But Hsu observed that respondents from various political affiliations — including Democrats, Independents, and Republicans — agree that their economic outlook has diminished since February.

“The klaxon of layoff headlines, a falling stock market and tariff fears were a big blow to consumer confidence in early March,” Bill Adams, Chief Economist for Comerica Bank, said recently in an email obtained by CBS News. “The pullback in confidence is becoming a real threat to consumer spending which, as is often repeated, accounts for two thirds of U.S. economic activity.”

Consumers with depleted emergency savings funds who are unable to attain new credit products can turn to financial education to help them create a workable household budget.

And those who owe money to lenders may require the services of credit counseling agencies to help them develop a plan to pay down their debt.

We checked in with Aaron Razon, personal finance expert with Coupon Snake, to learn how consumers can position themselves for financial success when faced with unfavorable economic circumstances.

“Sometimes the only way consumers can successfully stay above water and avoid going into deeper debt in trying times is to ask for professional assistance,” Razon told us. 

2025 hasn’t been kind to many consumer wallets and retirement savings accounts, and some economists warn that a recession may be on its way. But money management experts and credit counselors have a golden opportunity in front of them to help those struggling to regain their financial footing. 

“The truth is that it will be easier for consumers to navigate the complex economic conditions of a recession without hurting the quality of their life when they are aided with knowledge, tools, and strategies to help them optimize their finances,” Razon said. “They would just have to realize that it would be much more effective to be proactive than to have to react to a much more complicated financial crisis.”