Consumer sentiment registered a modest improvement in January but remained depressed from a year ago as high costs and poor job prospects are weighing on US households.
The University of Michigan’s Index of Consumer Sentiment for January came in at 56.4, up 3.5 points from December but some 21% below last year’s level of 71.7. This rise beat forecasts, with data from Bloomberg showing economists expected this report to come in line with preliminary data out earlier this month of 54.
“Consumers see some minor improvements across the board … these are very, very small improvements,” Joanne Hsu, director of the survey of consumers, told Yahoo Finance over the phone.
“Consumers see a minor improvement on inflation expectations. Their labor market expectations have improved, but just a touch. … They don’t think we’re out of the woods.”
She added, “They’re just feeling less dour about things than they were last month.”
Read more: What is consumer confidence, and why does it matter?
People shop for meat in a grocery store in the Manhattan borough of New York City on Dec. 13, 2025. (CHARLY TRIBALLEAU / AFP via Getty Images) · CHARLY TRIBALLEAU via Getty Images
Inflation expectations showed some signs of improvement, with year-ahead inflation forecasts falling to 4% from 4.2%.
“Consumers were feeling like the future of inflation was stabilizing. … [It’s] still higher than they want … But I do suspect this may be tenuous if increased escalating trade war rhetoric returns,” Hsu said.
The University of Michigan’s release noted that consumers don’t appear to be connecting international developments with their own view of the domestic economy.
Interviews for the index wrapped up on Monday, following President Trump’s threat to impose tariffs on eight European countries in an effort to buy Greenland over the weekend. That deescalated on Wednesday when he took to Truth Social to share that he reached a framework of a deal with NATO Secretary General Mark Rutte.
If tariff turbulence remains, that could impact consumers’ outlook.
“If there’s some real movement towards a trade war, a renewed trade war, I think that would certainly be something that would weigh on consumers because they’ve just been kind of gradually easing up on their worries about tariffs,” Hsu said.
While short-lived tariff talk won’t impact their outlook, Hsu added that “if things start to ramp up like they did last April and May, then that would certainly weigh on consumers.”
—
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
Click here for the latest economic news and indicators to help inform your investing decisions
Read the latest financial and business news from Yahoo Finance