Americans' Inflation Concerns Rise, Driving Consumer Sentiment to Lowest in Seven Months
The latest University of Michigan consumer sentiment survey reveals a significant decline to 67.8 in February, its lowest level in seven months. This drop is attributed to growing pessimism about inflation, with one-year inflation expectations surging from 3.3% to 4.3%.
The increase in inflation expectations marks the highest since November 2023, with two consecutive months of substantial gains. It is also only the fifth such significant one-month rise in 14 years.
Economists believe that the sharp increase in expectations suggests concerns about the potential economic impact of recent policy decisions. However, the Federal Reserve Bank of Chicago emphasizes the importance of market-based data and dismisses the survey's volatility for short-term inflation expectations.
Long-term inflation measures, such as the 10-year breakeven inflation rate, remain anchored around the Fed's target of 2%.
The survey also highlights a decline in the current conditions index, which evaluates consumer perceptions of economic growth, inflation, and demand. This drop is largely driven by a pessimistic outlook on the impact of tariffs.
Overall, the report reflects a growing anxiety among Americans about the state of the economy, particularly due to concerns about inflation.