The Claman Countdown panelists Kenny Polcari and Jose Torres unpack consumer stress.
U.S. consumer sentiment declined more than expected in February to the lowest level in more than a year while expectations about inflation surged amid uncertainty surrounding President Donald Trump’s tariff plans.
The University of Michigan Surveys of Consumers on Friday released its consumer sentiment index which dropped from 71.7 in January to 64.7 in February. That’s the lowest reading since November 2023 and was weaker than the preliminary reading of 67.8, which was the consensus expectation among economists polled by Reuters.
Surveys of Consumers Director Joanne Hsu noted that while sentiment fell for both Democrats and Independents, it was unchanged for Republicans, which she wrote was reflective of “continued disagreements on the consequences of new economic policies.”
Households’ inflation expectations also rose to 4.3% over the next year – the highest level since November 2023 and a sharp uptick from 3.3% last month.
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Consumer confidence plunged more than expected in February. (Victor J. Blue/Bloomberg via Getty Images / Getty Images)
Hsu added that the current reading of inflation expectations is “now well above the 2.3-3.0% range seen in the two years prior to the pandemic.”
Over the next five years, households said they expect inflation to run at 3.5%, which was the highest since 1995 and an increase from 3.2% in January. Hsu noted that was the largest month-over-month increase in the metric since May 2021.
“For both short- and long-run inflation expectations, this month’s increases were widespread and seen across income and age groups. Inflation expectations rose this month for Independents and Democrats alike; they fell slightly for Republicans,” Hsu wrote.
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Households’ inflation expectations jumped to the highest level since November 2023. (Gabby Jones/Bloomberg via Getty Images / Getty Images)
The report comes as inflation has remained stubbornly above the Federal Reserve’s 2% target in recent months. The consumer price index, a popular inflation gauge, came in hotter than expected at 3% on an annual basis for January.
President Trump’s tariff plans have taken shape during his first month in office. He announced 10% tariffs on imports from China, on top of existing levies, that have since taken effect. Trump also delayed 25% tariffs on Canada and Mexico until at least early March after the two countries announced border security measures.
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He has also announced 25% tariffs on imported steel and aluminum, as well as calling for a reciprocal tariff plan that would match U.S. tariffs to those imposed by other countries on American exports – which is expected to be implemented following the completion of a study by the administration in April.
Reuters contributed to this report.
