In February, U.S. consumer sentiment fell to its lowest in over a year, accompanied by rising inflation expectations, reflecting uncertainties around President Donald Trump’s tariff plans. According to the University of Michigan Surveys of Consumers, the consumer sentiment index decreased from 71.7 in January to 64.7 in February, marking the lowest figure since November 2023. This decline surpassed economists’ predictions, as indicated by a consensus expectation of 67.8 from a Reuters poll.
Joanne Hsu, the Director of Surveys of Consumers, highlighted that sentiment declined among Democrats and Independents but remained unchanged for Republicans, attributing this to ongoing disagreements about the impact of new economic policies.
Inflation expectations among households rose to 4.3% for the upcoming year, the highest since November 2023, escalating from 3.3% in the previous month. Hsu pointed out that this inflation expectation significantly exceeded the 2.3-3.0% range observed in the two years prior to the pandemic.
Over a five-year span, households anticipated inflation at 3.5%, the highest since 1995, increasing from 3.2% in January. This represents the largest month-over-month spike in this metric since May 2021. Hsu observed that both short- and long-term inflation expectations experienced a widespread rise across various income and age groups, with Democrats and Independents reporting increases, while Republicans saw a slight decrease.
This report emerges as inflation remains persistently above the Federal Reserve’s 2% target. January’s consumer price index, a key measure of inflation, recorded a 3% year-over-year increase, surpassing expectations.
President Trump’s administration has implemented 10% tariffs on Chinese imports, adding to existing tariffs. Additionally, the imposition of 25% tariffs on Canada and Mexico was deferred until at least early March following the announcement of border security measures by these countries. Furthermore, 25% tariffs on imported steel and aluminum have been declared, alongside a proposed reciprocal tariff plan intended to match U.S. tariffs with those imposed by other countries on American goods, expected to be executed after an administrative study concludes in April.
