Wow. Notable drop in consumer sentiment in February. American consumers do not like tariffs.
“About one-third of consumers spontaneously mentioned tariffs, up from 27% last month and less than 2% prior to the election.”
“This is only the fifth time in 14 years we have seen such… pic.twitter.com/SpjN6uanoX
— Heather Long (@byHeatherLong) February 7, 2025
The University of Michigan’s gauge of consumer sentiment fell to 67.8 in a preliminary February reading, down from 71.1 in the prior month and the lowest reading since July.
Economists polled by the Wall Street Journal had expected sentiment to rise to a reading of 74 in February.
The decline in sentiment was widespread, with lower readings for Republicans, Democrats and independents.
Another key part of the report is the University of Michigan’s measure of inflation expectations.
According to the report, Americans’ expectations for overall inflation over the next year jumped to 4.3% in February from 3.3% in the prior month. That’s highest level since November 2023, and it is only the fifth time in 14 years that there has been a one-month gain of that size.
Longer-run inflation expectations ticked up to 3.3% in February from 3.2% in the prior month.
Key details: According to the report, a gauge of consumers’ views on current conditions, one component of the headline number, fell to 68.7 in February from 74 in the prior month, while the other component, a barometer of their expectations, slipped to 67.3 in February from 69.3 in January.
“Many consumers appear worried that high inflation will return within the next year,” said Joanne Hsu, the survey’s director. “This is only the fifth time in 14 years we have seen such a large one-month rise (one percentage point or more) in year-ahead inflation expectations.”
Worries over inflation dovetailed with lower optimism overall, as the headline index fell to 67.8, a one-month drop of 4.6% and an 11.8% move lower from the same month a year ago. Economists surveyed by Dow Jones had been looking for a reading of 71.3.
The survey sometimes is influenced by shifting political winds. However, Hsu noted that declining sentiment was “pervasive, with Republicans, Independents, and Democrats all posting sentiment declines from January, along with consumers across age and wealth groups.”
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes,” said Robert Frick, corporate economist at Navy Credit Union. “Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
Hsu said overall declines in the various survey indexes reflect “a perception that it may be too late to avoid the negative impact of tariff policy.”
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