US consumers are growing increasingly pessimistic about the economy, with a new survey showing a sharp decline in sentiment and soaring inflation expectations. The University of Michigan’s consumer sentiment survey released on Friday showed headline sentiment plummeting nearly 10% from January to a reading of 64.7.
Pessimism over inflation is driving the decline, as consumers expect prices to rise sharply in the coming year, with one-year inflation expectations jumping to 4.3%. This marks the highest reading since November 2023 and the second consecutive month of “unusually large” increases.
Experts attribute the shift to concerns over Trump’s trade policy, particularly tariffs on steel, aluminum, and autos. While economists have largely downplayed the impact of these tariffs, some warn that they could still drive up prices and fuel inflation.
“We’re seeing a very broad-based conclusion among consumers that inflation is going to pick up in the year ahead,” said Joanne Hsu, director of consumer surveys at the University of Michigan. “It’s not necessarily cause for panic, but these expectations are being driven by concerns over policy and tariffs.”
Long-run inflation expectations have also climbed, rising to 3.5% from 3.2% in January. This is the highest reading since April 1995 and the largest month-over-month increase since May 2021.
While some economists remain skeptical about the impact of Trump’s trade policies, others warn that they could still drive up prices and fuel inflation. As one expert noted, “People are not reacting to current price shocks. They’re reacting to anticipated price shocks.”
Source: https://finance.yahoo.com/news/inflation-fears-surge-in-february-as-consumer-sentiment-plunges-over-tariff-uncertainty-164702389.html