Summary
- U.S. consumer sentiment increased in January, with the index revised up to 56.4 from Decemberโs 52.9.
- Inflation expectations eased, with consumers expecting 4% price increases over the next year.
- Consumer spending remains resilient, but weakening fundamentals may slow consumption ahead.
Consumer sentiment in the United States continued to improve in January, despite the sentiment being 21% below a year ago.
The University of Michigan on Friday released data showing consumer sentiment in the U.S. has greatly increased more than what was anticipated to occur in January 2026.
The University stated that its consumer sentiment index for January was upwardly revised to 56.4 from a preliminary reading of 54.0. The index was at 52.9 in December, and economists had predicted the index would be unrevised from the preliminary estimate.
โWhile the overall improvement was small, it was broad-based, seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike,โ Joanne Hsu, survey director, said in an analysis.
She added โHowever, national sentiment remains more than 20% below a year ago, as consumers continue to report pressures on their purchasing power stemming from high prices and the prospect of weakening labor markets.โ
According to data released on Friday, consumers anticipate price increases of 4% annually over the next year, which is the lowest since January 2025. Consumers’ expectations for inflation over the next five years dipped to 3.3% from a preliminary estimate of 3.4%. Long-term inflation expectations edged up from 3.2% last month.
โWith affordability pressures proving stubborn, a near-term sentiment rebound looks unlikely,โ said Oren Klachkin, financial markets economist at Nationwide.
This confidence is a crucial indication for Federal Reserve policymakers, who are concerned that long-standing anxieties about price increases may affect wage-setting and spending decisions, potentially causing inflation to spiral out of control.
Consumer spending has persisted despite general discontent
This spending resilience indicates that although households are under stress, they have not yet made a significant cutback.
โWhile resilient spending has defied depressed consumer sentiment, a sluggish labor market alongside a declining saving rate points to consumption weakness ahead, particularly as lower-income households show increasing signs of stress,โ Felix-Antoine Vezina-Poirier, chief strategist at BCA Research, wrote Friday morning. โConsumption was the largest contributor to GDP (gross domestic product) growth in Q3. It still shows resilience in Q4, but its underlying drivers are weakening.โ
