The numbers: In a preliminary February reading, the University of Michigan’s consumer sentiment indicator dropped to 67.8, the lowest level since July, from 71.1 the previous month.
The Wall Street Journal poll of economists predicted that sentiment would increase to 74 in February.
There was a general drop in sentiment, with worse ratings for Democrats, Republicans, and independents.
The University of Michigan’s inflation expectations metric is another important component of the study.
In February, Americans’ predictions for overall inflation over the next year increased from 3.3% to 4.3%, the research said. It is only the sixth time in 14 years that there has been a one-month gain of such magnitude, and it is the greatest level since November 2023.
Expectations for longer-term inflation increased little from 3.2% in January to 3.3% in February.
Key information: The research states that one component of the headline figure, a measure of consumers’ opinions about the state of affairs, dropped from 74 in January to 68.7 in February, while another component, a measurement of their expectations, dropped from 69.3 in January to 67.3 in February.
Overall: This marks the second significant decline in mood.
According to economists, President Donald Trump’s threats of tariffs on China, Canada, and Mexico are most likely the cause of this month’s decline in confidence.
Republicans, Democrats, and independents all reported a decline in sentiment in February, indicating that the decline was widespread. Compared to recent months, when Republicans were more upbeat than Democrats, that represents a change.
The University of Michigan surveys are frequently minimized by Federal Reserve officials.
Following the data’s release on Friday, Austan Goolsbee, president of the Chicago Federal Reserve Bank, stated that he places greater emphasis on market-based indicators of long-term expectations. He stressed that those values are still based on the Fed’s 2% objective.
Considering the future: “We are concerned that if complications related to the current trade war persist, inflation sentiment may continue to worsen, putting even more pressure on inflation and the Fed,” Tuan Nguyen, RSM US’s U.S
