Consumer Sentiment Falls in January
Consumer sentiment dipped 4% in January, driven by inflation concerns, rising unemployment fears and declines across demographics.
ANN ARBOR, Mich. — Consumer sentiment fell for the first time in six months, edging down 4% from December, according to the University of Michigan's Consumer Sentiment Index.
While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back. Indeed, sentiment declines were broad based and seen across incomes, wealth and age groups.
Buying conditions for durables softened but remained about 30% better than six months ago amid persistent views that purchasing now would avoid future price increases. Despite reporting stronger incomes this month, concerns about unemployment rose; about 47% of consumers expect unemployment to rise in the year ahead, the highest since the pandemic recession. January’s data closed on Inauguration Day, and consumers of all political leanings will continue to refine their views as President Donald Trump’s policies are clarified and implemented.
Year-ahead inflation expectations soared from 2.8% last month to 3.3% this month. The current reading is the highest since May 2024 and is above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations rose from 3.0% last month to 3.2% this month, the same reading seen in November 2024. For both the short and long run, inflation expectations rose across income and educational groups.
Concerns over the future trajectory of inflation were visible throughout the interviews and were tied to beliefs about anticipated policies like tariffs. Consumers continued to spontaneously express motives for buying-in-advance to avoid future price increases, and robust auto and retail sales data suggest that consumers are indeed acting on these views.
Source: University of Michigan
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