The University of Michigan Consumer Sentiment Index for the U.S. was revised lower to 71.1 in January 2025. The index dropped 2.9 points (3.9 percent) from December’s final reading to 74.0 and is down 10.0 percent compared to one year ago. The latest reading was lower than the 73.2 forecast.
The Current Economic Conditions rating was 74.0, down from 75.1 in December and 81.9 in January 2024. The Index of Consumer Expectations reached 69.3, down from 73.3 in December and 77.1 a year ago.
Surveys of Consumers Director Joanne Hsu said, “Consumer sentiment fell for the first time in six months, edging down 4 percent from December. While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back. Indeed, sentiment declines were broad-based and seen across incomes, wealth and age groups. Buying conditions for durables softened but remained about 30 percent better than six months ago amid persistent views that purchasing now would avoid future price increases.
“Despite reporting stronger incomes this month, concerns about unemployment rose; about 47 percent of consumers expect unemployment to rise in the year ahead, the highest since the pandemic recession. January’s data closed on Inauguration Day, and consumers of all political leanings will continue to refine their views as Trump’s policies are clarified and implemented.
“Year-ahead inflation expectations soared from 2.8 percent last month to 3.3 percent this month. The current reading is the highest since May 2024 and is above the 2.3-3.0 percent range seen in the two years prior to the pandemic. Long-run inflation expectations rose from 3.0 percent last month to 3.2 percent this month, the same reading seen in November 2024. For both the short and long run, inflation expectations rose across income and educational groups.
“Concerns over the future trajectory of inflation were visible throughout the interviews and were tied to beliefs about anticipated policies like tariffs. Consumers continued to spontaneously express motives for buying-in-advance to avoid future price increases, and robust auto and retail sales data suggest that consumers are indeed acting on these views,” concluded Hsu.
