Fears that tariff-induced price increases are imminent caused shoppers’ outlook to fall for the second straight month, the latest Index of Consumer of Sentiment by the University of Michigan has found. The decrease was unanimous across groups by age, income and wealth.
“All five index components deteriorated this month, led by a 19% plunge in buying conditions for durables,” said Surveys of Consumers Director Joanne Hsu. “Expectations for personal finances and the short-run economic outlook both declined almost 10% in February, while the long-run economic outlook fell back about 6% to its lowest reading since November 2023. “
While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies.
Meantime, year-ahead inflation expectations jumped up from 3.3% last month to 4.3% this month, the highest reading since November 2023 and marking two consecutive months of unusually large increases. The current reading is now well above the 2.3-3.0% range seen in the two years prior to the pandemic.
In addition, long-run inflation expectations rose over the course of the month and climbed from 3.2% in January to 3.5% in February. This is the largest month-over-month increase seen since May 2021. For both short- and long-run inflation expectations, this month’s increases were widespread and seen across income and age groups. Inflation expectations rose this month for Independents and Democrats alike; they fell slightly for Republicans.
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