U.S. Consumer Sentiment Dips Slightly
Year-ahead inflation expectations increased from 2.8% last month to 3.3% this month, according to the Consumer Sentiment Index by the University of Michigan.
ANN ARBOR, Mich. — U.S consumer sentiment was essentially unchanged in January, inching down less than one index point from December, well within the margin of error, according to the University of Michigan's Consumer Sentiment Index.
Assessments of personal finances improved about 5%, while the economic outlook fell back 7% for the short run and 5% for the long run. January’s divergence in views of the present and the future reflects easing concerns over the current cost of living this month, but surging worries over the future path of inflation. Overall, this month’s deterioration in the expectations index was seen across political affiliations, including declines of about 3% for Independents and 1.5% for Republicans.
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 3.3% this month. This is only the third time in the last four years that long-run expectations have exhibited such a large one-month change.
For both the short and long run, inflation expectations rose across multiple demographic groups, with particularly strong increases among lower-income consumers and Independents. Note that inflation uncertainty — as estimated using the interquartile range in inflation expectations — has climbed considerably over the past year, though it remains well below levels seen in the 1970s.
Source: University of Michigan
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