Consumer confidence in Virginia nears record low as economic anxiety grows

Yahoo

28-05-2025

Consumer confidence in Virginia nears a record low, according to a Roanoke College poll, as tariff concerns and economic uncertainty outweigh gains in wages. (Photo by)
Consumer sentiment in Virginia continues to slide, reaching its second-lowest level on record, according to the latest quarterly report by the Institute for Policy and Opinion Research (IPOR) at Roanoke College, released Wednesday.
'While the labor market remains strong and wage growth is outpacing inflation, uncertainty is weighing heavily on consumers, particularly around tariffs,' said Alice Louise Kassens, Roanoke College's John S. Shannon Professor of Economics and senior analyst at IPOR. 'This uncertainty is reflected in both short- and long-term inflation expectations, which remain elevated despite recent easing in actual inflation rates.'
The Virginia Index of Consumer Sentiment fell to 63.6 in the second quarter of 2025, continuing a 13-point slide over the past six months and marking the second-lowest reading since the index began in 2011. The drop underscores growing unease among Virginians, particularly surrounding the economic consequences of new tariffs and the general direction of the national economy.
Kassens warned that a continued slide in sentiment could soon translate into concrete economic consequences.
'Consumer spending, which drives nearly 70% of economic activity, has remained robust, albeit tempered,' she said. 'However, if sentiment continues to decline, we may see a pullback in spending that could slow economic growth or even trigger a recession.'
That warning comes despite some signs of strength in the broader economy. The labor market remains resilient, and Virginia workers are seeing wage increases that exceed inflation. Average wage growth in the commonwealth is currently 3.8%, compared to 2.3% inflation as measured by the Consumer Price Index. This gap suggests increased purchasing power for households, a key support for ongoing economic activity.
Still, many Virginians remain cautious.
Just 20% of respondents said their household finances are better today than they were a year ago, while 30% expect improvement over the next year. Meanwhile, 32% anticipate worsening conditions, and 59% believe the next few years will be marked by economic difficulty.
Short-term inflation expectations remain stubbornly high, even as actual inflation continues to moderate. Many survey respondents indicated they were accelerating purchases of big-ticket items like refrigerators in anticipation of higher prices to come. In fact, 37% said it was a good time to buy such durable goods, citing concern over the inflationary effects of tariffs.
'Despite months of easing inflationary fears in the commonwealth over 2024, the inflationary effects of tariffs are keeping short-term inflation expectations elevated,' the report notes. 'These concerns can have a chilling effect on the economy as consumers and businesses experience difficulty in financial planning.'
The Virginia Index of Current Conditions, which measures sentiment about personal finances and buying conditions today, declined 2.2 points from last quarter to 60.8. That remains slightly above the national index, a trend that continued in future expectations as well. The Virginia Index of Consumer Expectations held at 65.4 — unchanged from the previous quarter — while the national index dropped nearly 18 points to 46.5.
Kassens said that disparity may point to some localized resilience.
'The divergence between Virginia and national sentiment, where Virginia remains more optimistic, suggests regional resilience, but that could be tested if inflationary and uncertainty pressures persist,' Kassens said. 'As we move into the second half of 2025, the trajectory of consumer sentiment will be a key indicator to watch.'
The results are based on a representative sample of 719 Virginia adults surveyed between May 12 and May 19. The survey was conducted using a combination of phone interviews (including landlines and texts to mobile phones) and an online panel.
The phone sample was drawn by Marketing Systems Group using random digit dialing, while the online panel was managed by Cint USA, Inc. Responses were statistically weighted to reflect the gender, age, and racial demographics of Virginia according to the 2023 American Community Survey.
Regional quotas were also applied to ensure proportional representation across different areas of the state. About 38% of completed phone and text-to-web interviews came via mobile phones. Interviews were conducted in English, and attention checks were built into the online questionnaire to ensure quality responses.
The continued decline in consumer confidence — despite economic indicators that might otherwise encourage optimism — suggests that psychological factors such as uncertainty and inflation fear may be outweighing hard data in shaping household expectations.
Kassens emphasized that while wage growth and job availability remain bright spots, sentiment will be a key factor to watch as the year progresses.
'We're at a critical juncture,' she said. 'If consumers lose confidence in their ability to spend and plan ahead, it could create ripple effects that weaken an otherwise sturdy economic foundation.'
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