Consumer Sentiment Drops 9.8% Amid Fears of ‘Tariff-Induced Price Increases’

Concerns that tariffs will lead to higher prices drove a 9.8% decline in consumer sentiment in February, according to the University of Michigan’s Surveys of Consumers.

Consumer sentiment saw a 9.8% month-over-month decline and a 15.9% year-over-year decline, according to the survey’s final results for February released Friday (Feb. 21).

While all five components of the index deteriorated during the month, the trend was “led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent,” Surveys of Consumers Director Joanne Hsu said the press release

Consumers’ expectations for personal finances and the short-term economic outlook both declined about 10%, while their long-term economic outlook fell about 6% to reach the lowest level since November 2023, according to the release.

The decrease in sentiment was unanimous across groups by age, income and wealth, but not by political affiliation.

“While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies,” Hsu said in the release.

Both short-term and long-term inflation expectations increased in February. The increases were widespread, though they fell slightly among Republicans, per the release.

Overall, year-ahead inflation expectations jumped from 3.3% in January to 4.3% in February — the highest reading since November 2023 — and long-run inflation expectations climbed from 3.2% in January to 3.5% in February.

PYMNTS Intelligence found in a survey conducted in early February that 71% of consumers and small businesses said they were knowledgeable about potential import tariffs.

Among those informed consumers, 78% said they expect that tariffs will lead to higher prices and 75% said they expect tariffs to cause product shortages.

“If you’re getting flashbacks to those empty store shelves during COVID, you’re not alone,” PYMNTS CEO Karen Webster wrote when reporting these findings. “It’s the same kind of anxiety that consumers now express, just with a different root cause.”

The PYMNTS Intelligence survey also found that this sentiment was consistent across income, financial lifestyle and demographic cohorts, and that most every consumer viewed the impact of the proposed tariffs as more negative than positive.