U.S. Consumer Sentiment Falls Sharply in February Amid Inflation Concerns

WASHINGTON, D.C. — U.S. consumer sentiment plunged in February, marking its steepest decline in months as inflation fears surged, according to the University of Michigan’s latest report released Friday. The consumer sentiment index was revised downward to 64.7, a significant drop from the preliminary estimate of 67.8, and well below January’s reading of 71.7.

The February figure represents the lowest level of consumer confidence since November 2023, when the index stood at 61.3. Economists had anticipated the preliminary estimate would remain unchanged, making the decline an unexpected blow to hopes of continued economic optimism.

“All five index components deteriorated this month, led by a 19% plunge in buying conditions for durable goods,” said Joanne Hsu, director of the university’s Surveys of Consumers. She attributed the decline largely to fears of potential price increases stemming from new trade tariffs.

The report also highlighted a surge in inflation expectations, with year-ahead inflation projections jumping to 4.3% from 3.3% in January, marking the highest level since November 2023. Long-run inflation expectations also climbed to 3.5% from 3.2%, the largest month-over-month increase since May 2021.

Political divisions remain evident in consumer sentiment trends. While confidence declined among Democrats and Independents, Republican sentiment remained unchanged, reflecting ongoing partisan differences over economic policy and its consequences.

“With both short- and long-run inflation expectations increasing, concerns about price stability appear to be broad-based,” said Hsu. “The rise in inflation expectations was widespread across different income and age groups.”

The drop in consumer confidence comes at a critical moment for the U.S. economy, as the Federal Reserve navigates its strategy for potential interest rate cuts amid persistent inflation concerns. The unexpected decline in sentiment may signal that consumers are growing more cautious about the economic outlook in the months ahead.