Consumer Sentiment Drops Amid Concerns About Tariffs and Inflation

Consumer sentiment dropped about 5% in February, falling to its lowest level since July, according to preliminary results for the University of Michigan’s February Surveys of Consumers.

This was the second consecutive month in which consumer confidence dropped, following a 4% slide in January that marked the first decline in the reading in six months.

Surveys of Consumers Director Joanne Hsu attributed the drop in part to consumers’ concerns about the impact of tariffs, according to a Friday (Feb. 7) press release.

Hsu said that while all components of the index declined in February, the deterioration was “led by a 12% slide in buying conditions for durables, in part due to a perception that it may be too late to avoid the negative impact of tariff policy.”

The survey found that many consumers are worried that high inflation will return within a year, according to the release.

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 inched up from 3.2% to 3.3%, per the release.

“This is only the fifth time in 14 years we have seen such a large one-month rise (one percentage point or more) in year-ahead inflation expectations,” Hsu said in the release.

President Donald Trump announced tariffs Saturday (Feb. 1) that would levee a 25% bump on imports from Canada and Mexico and 10% on China. Trump also promised to introduce tariffs on European Union imports, but the timing around that action was uncertain.

Trump later agreed to delay tariffs on Canada and Mexico, but the 10% levies on China went live Tuesday (Feb. 4).

The Conference Board said Jan. 28 that consumer confidence declined in January but remained within the narrow range it has been in since 2022.

“All five components of the Index deteriorated but consumers’ assessments of the present situation experienced the largest decline,” Dana M. Peterson, chief economist at The Conference Board, said at the time in a press release. “Notably, views of current labor market conditions fell for the first time since September, while assessments of business conditions weakened for the second month in a row.”