Consumers are starting to freak out.

Dan Armstrong, a building manager and part-time security guard in Braintree, Mass., started getting spooked about three weeks ago, when talk of mass layoffs and higher prices began dominating conversations with friends and colleagues who had never brought the subject up before. They started swapping tips on where to find the best deals for frozen food and gasoline.

On Friday morning, Armstrong, 63 years old, canceled his daughter’s high-school class trip to Spain to free up cash. The trip was going to cost him $322 a month until the trip in spring 2026. The single dad, an independent who voted for Kamala Harris , has also cut back on buying new clothes and ordering food from Grubhub, a treat he and his daughter used to indulge in once a week.

“Things look increasingly bleak for us for the next few years,” he said. “We are cutting back on virtually everything.”

President Trump’s stop-and-start trade wars and other rapid-fire policy changes are making Americans feel gloomy about the economy. Their 401(k)s are down, and their expectations for inflation are up. Now they are paring back spending on extras such as vacations and home-improvement projects.

FILE PHOTO: Delta Airlines passenger jets are pictured outside the newly completed 1.3 million-square foot $4 billion Delta Airlines Terminal C at LaGuardia Airport in the Queens borough of New York City, New York, U.S., June 1, 2022. Last week Delta cut first-quarter guidance. REUTERS/Mike Segar/File Photo

The University of Michigan’s closely watched index of consumer sentiment nosedived 11% to 57.9 in mid-March from 64.7 last month. Sentiment among Democrats was the lowest ever recorded, including the depths of the 2008-09 financial crisis. Even Republicans are feeling worse, although many think that any short-term economic pain caused by Trump’s moves will be worth it. On a recent Sunday, Trump declined to rule out a recession.

Bleak sentiment about the economy can become a self-fulfilling prophecy. Nervous consumers tend to cut back, which weighs on spending and economic growth. While economists have been marking down their estimates for the economy, they still expect it to grow.

“The consumer drives the U.S. economy,” said Rebecca Patterson, an economist and senior fellow at the Council on Foreign Relations. “Where the consumer goes the economy goes.”

The sour mood is starting to show up in key data. Consumer spending in January had its largest monthly drop in around four years, though some of that might be attributed to lousy weather. Bank of America said customers spent 2% more on their credit and debit cards over the seven days ended March 8, compared with a year earlier, but said spending on airlines fell by 7.1% and home-improvement expenditures were down 2.7%.

“Consumers cut back first on the nice-to-haves and the big-ticket items,” said Patterson. “Within the must-haves like food, they might switch to a lower-cost brand.” People might only cut back modestly because the job market is solid, and many are still enjoying big gains in their personal wealth from higher home prices, she said.

Companies making everything from casual wear to luxury goods and liquor to everyday staples are sounding early warnings of a slowdown in consumer demand. Delta Air Lines and American Airlines cut their first-quarter guidances this past week. On Tuesday, Delta Chief Executive Officer Ed Bastian said that there was “something going on with economic sentiment, something going on with consumer confidence.”

FILE PHOTO: A sign for customers shopping for eggs at Trader Joe’s hangs by cartons of eggs in Merrick, New York, U.S., February 10, 2025. REUTERS/Shannon Stapleton/File Photo

Budget-pressured shoppers are exhibiting “stress behaviors, and we worry about that,” Walmart CEO Doug McMillon said during a Feb. 27 presentation at the Economic Club of Chicago. “You can see that the money runs out before the month is gone,” he added. Working-class and middle-class consumers, hit hard by higher prices, were already beginning to cut back before the November election.

Ellen Miller and her husband, Craig Miller, who live in Quakertown, Pa., already cut back on hosting friends at their home and started smoking and freezing more meat themselves. Last year she skipped her annual tradition of sending out Christmas cards, given the rising prices of stamps.

Sales of her Native American prints and cards on Etsy have seen a marked drop in recent months, while everyday items she buys keep getting more expensive. Consumer prices were up 2.8% in February from a year earlier.

The couple are celebrating their 34th anniversary this weekend. Going out to eat, as they did in years past, is too expensive, so Ellen Miller was planning to cook a special meal at home. On Thursday, she headed to the more cost-friendly supermarket option in her area, a Giant Food supermarket, hoping to get a steak. But the rib-eye she wanted was close to $30 a pound. She ended up buying a whole chicken at a fraction of the price and will be making enchiladas instead.

“It feels like another level of pressure has come,” she said. “Now, it’s even too expensive to have steak at home.”

In February, small-business uncertainty reached its second-highest level in the more than 50 years that the National Federation of Independent Business has been polling small-business owners, the group said. The highest reading was in October, just before the election. Sales expectations declined for a second month in a row after surging following the vote.

Sales at McAlister Photoworks in Columbus, Ohio, are on track to fall more than 20% in March from a year earlier, the owner, Ray Duval, said. The four-person company sells photo prints and related products for an average order size of $44.

The store has recently been averaging 21 transactions a day instead of the usual 30 to 35. Phone calls from prospective customers have slowed to a trickle since the inauguration, said Duval, a libertarian who sometimes wears to work a shirt that says “Not Compatible With Marxism.” Vendors tell him others in the industry are seeing the same thing happening.

FILE PHOTO: Dollar General shopping carts are seen outside a store in Mount Rainier, Maryland, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo

“I’m looking around waiting for people to walk in the door, and they’re not walking in the door,” Duval said. “I’m a bad week away from not making payroll.”

GreatBuildz, a company in the Los Angeles area that matches homeowners with contractors, started seeing business slow in late February. Inquiries are down about 20%, and that has led the eight-person outfit to cut back on marketing. GreatBuildz put together a 30-second TV spot a month ago, but is still waiting to air it. “People are psychologically on the sidelines,” said co-founder Paul Dashevsky.

Suresh Mallikaarjun, 68, decided to hold off on shopping for a new car after watching his retirement accounts decline alongside the broader stock market. He earns some money from consulting but draws from those accounts to help cover his living expenses.

A few weeks ago, he signed up for new budgeting software and started examining his expenses more closely.

Mallikaarjun, a Democrat who lives in a Washington, D.C., suburb, voted for Harris. He expected Trump to focus more on issues such as immigration than on tariffs that could whipsaw markets and the economy.

“I’ve lived in this country for 42 years, I’ve never seen a time like this,” said Mallikaarjun, who was born in India. “In January, everything is OK, and then suddenly the whole Earth opens up before you.”

Anxiety is especially high in his region. About a month ago, he attended an event with friends, some of whom are federal workers worried about what Elon Musk’s Department of Government Efficiency has in store for them.

“The mood was not very good,” Mallikaarjun said.

Write to Rachel Louise Ensign at Rachel.Ensign@wsj.com , Natasha Khan at natasha.khan@wsj.com and Ruth Simon at Ruth.Simon@wsj.com