Consumer sentiment rises in January but high prices remain big concern
The mood of Americans improved in January, but remains depressed from a year ago,
The University of Michigan’s Index of Consumer Sentiment rose to 56.4 in January, up from 52.9 in December, with minor gains across all index components. The improvement was broad-based and seen across groups by income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike.
Although sentiment improved in January, it remains more than 20% below a year ago, as consumers continue to report pressures on their budgets stemming from high prices and the prospect of weakening incomes, said University of Michigan economist Joanne Hsu, director of the surveys.
Consumers view of current conditions rose to 55.4 in January, up from 50.4 in December. It is down 26.2% from a year ago. The expectations index rose to 57.0 in January, from 54.6 in December. It is down 18% from a year ago.
High Prices
High prices continue to weigh down the personal finances of consumers as well as buying conditions for major purchases. About 45% of consumers spontaneously mentioned that high prices were eroding their living standards, compared with 34% a year ago.
Buying conditions for major purchases, like large household durable goods and vehicles, rose slightly up this month but remain relatively poor from a historical perspective, Hsu said. High prices were the top reason mentioned by consumers. About 73% of consumers reported that it is a bad time to buy vehicles, with prices again serving as the most-mentioned reason.
Views Still Negative
January interviews revealed modest gains on a number of dimensions of the economy, but not enough to recover losses seen over the course of 2025. Business conditions for the year ahead as well as the long run ticked up around 6%, but both are more than 20% worse than in January 2025.
Expected income growth for the year ahead increased slightly but remains below readings seen at the end of 2024. This month, about 62% of consumers expected unemployment to worsen in the year ahead, down slightly from December’s 63%.
"These dour views on labor markets are widespread, held by consumers across income groups," Hsu said. "Broadly speaking, consumers perceive some small improvements this month, but views remain much less favorable than a year ago."
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web.
