Consumer sentiment in the United States experienced a sharper decline than anticipated in February, reaching its lowest point in over a year, as concerns about inflation rose amid uncertainty over President Donald Trump’s tariff plans. The University of Michigan’s Surveys of Consumers revealed a drop in its consumer sentiment index from 71.7 in January to 64.7 in February, marking the lowest level since November 2023. This figure was also below the preliminary estimation of 67.8, which economists polled by Reuters had predicted.
Joanne Hsu, Director of the Surveys of Consumers, observed that sentiment decreased among Democrats and Independents, while it remained unchanged for Republicans. This pattern, she noted, indicated ongoing disagreements over the implications of new economic policies.
In addition to declining sentiment, households’ inflation expectations increased to 4.3% for the next year, the highest since November 2023, up from 3.3% last month. Hsu highlighted that these inflation expectations have surpassed the 2.3-3.0% range seen in the two years before the pandemic. Expectations for inflation over the next five years also rose to 3.5%, the highest since 1995, compared to 3.2% in January. Hsu pointed out that this rise represented the largest monthly increase in this metric since May 2021.
Hsu further commented that the recent rise in inflation expectations was widespread, affecting various income and age groups, with increases observed among Independents and Democrats, while falling slightly for Republicans.
The report emerges as inflation remains persistently above the Federal Reserve’s 2% target in recent months. The consumer price index, a key inflation indicator, exceeded expectations at 3% annually for January.
Meanwhile, President Trump has progressed with his tariff plans during his first month in office, implementing 10% tariffs on Chinese imports, in addition to existing levies. He also postponed the imposition of 25% tariffs on Canada and Mexico until early March, following the two countries’ announcements of border security measures. Furthermore, Trump announced 25% tariffs on imported steel and aluminum, and introduced a reciprocal tariff plan to align U.S. tariffs with those imposed by other countries on American exports. This new policy is expected to be implemented after an administrative study concludes in April.
Reuters contributed additional information to this report.