Consumer Sentiment Dips 4% Amid Concerns About Unemployment and Inflation

Consumer sentiment edged down 4% in January, marking the first decline in six months, according to the final results for the University of Michigan’s January Surveys of Consumers.

“While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back,” Surveys of Consumers Director Joanne Hsu wrote in a Friday (Jan. 24) press release. “Indeed, sentiment declines were broad based and seen across incomes, wealth and age groups.”

Consumers’ concerns about unemployment and inflation drove the declines, according to the release.

The share of consumers said they expect unemployment to rise over the next year — 47% — was the highest since the pandemic recession, the release said.

Year-ahead inflation expectations rose to 3.3%, a reading that was the highest since May and above the range of 2.3% to 3% that was seen in the two years before the pandemic, per the release. Long-run inflation expectations rose to 3.2%, which was the same reading as November.

“For both the short and long run, inflation expectations rose across income and education groups,” Hsu said in the release. “Concerns over the future trajectory of inflation were visible throughout the interviews and were tied to beliefs about anticipated policies like tariffs.”

Consumers mentioned that they were buying goods now to avoid expected future price increases, according to the release.

“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,” Hsu said in the release.

It was reported Jan. 3 that the price of new cars could rise due to tariffs that President Donald Trump has threatened to impose on Canada and Mexico — two countries that play important roles in the U.S. automotive industry’s supply chain.

Trump has said that tariffs can offset what he argues are unfair practices from foreign companies and governments.

JPMorganChase CEO Jamie Dimon said Jan. 12 that when used properly tariffs can be helpful with issues like national security and unfair competition.

“Like any tool, if it’s misused it can do damage too,” Dimon told CBS News, noting that he hadn’t spoken with Trump on the matter.