U.S. Consumer Sentiment Falls amid Job Market and Tariff Concerns
U.S. consumer sentiment declined in January, marking the first drop in six months. The University of Michigan's Consumer Sentiment Index dropped to 71.1, down from a preliminary reading of 73.2 and December's 74.0.
The decline was widespread across income, wealth, and age groups. Concerns about unemployment rose, with 47% of consumers expecting it to increase in the next year, the highest since the pandemic recession.
Inflation expectations remained elevated, with one-year expectations holding steady at 3.3% and 12-month expectations reaching 3.2%. This is above the pre-pandemic range of 2.3%-3.0%.
"Concerns over the future trajectory of inflation were visible throughout the interviews and were tied to beliefs about anticipated policies like tariffs," said Joanne Hsu, director of the University of Michigan's Surveys of Consumers.
The decline in sentiment coincided with the inauguration of President Donald Trump for a second term, who has planned tariffs on imported goods. These tariffs are seen as a potential threat to economic growth and consumer prices.