For businesses and consumers in recent weeks, figuring out what to do amid substantial economic uncertainty has been akin to “driving in dense fog.”
This analogy was used by Tom Barkin, president of the Federal Reserve Bank of Richmond, during a talk April 14 to members of the Greater Greer Chamber of Commerce.
Markets have been roiled in recent weeks in response to the widespread imposition of trade tariffs by the Trump administration. Barkin’s remarks reflected input he’s gathered in recent weeks from business and finance leaders throughout the Federal Reserve Bank’s Fifth District headquartered in Richmond and overseeing operations in both Carolinas, Maryland, Virginia, most of West Virginia and Washington, D.C.
Barkin said while financial markets have been extremely volatile, consumer spending, which he said makes up about 68% of the U.S. economy, remains relatively stable — for now.
He said the word “uncertainty” appeared a record number of times in March from feedback by business leaders collected through Richmond Fed outreach efforts. Confidence in the economy has slumped, and Barkin said he’s heard from a number of businesses that have put plans on hold pending a clearer picture of how tariffs and other national policies will impact the economy.
“You can speculate all you want,” Barkin said, “but I think it’s fair to say, ‘how will you know at this point what rates are going to end up being applied to what products or what countries and for how long?’”
While business decisions will have an economic impact, Barkin said fluctuations in consumer spending could be far more significant for the economy given how large a role it plays in driving the nation’s economic engine.
He added sharp declines in consumer spending don’t happen often — most recently at the outset of the pandemic and in the weeks immediately following the 9/11 attacks — but when they do they’re consequential for the economy.
He said with so many variables at play it’s hard for businesses and consumers to predict where the economy will stand in the coming months.
“I think people are just unclear about how all this is going to net out,” he said.
