Consumer sentiment rose to its highest level this month since September 2025, although it remains at historically low levels.
Consumer sentiment rose to 54, up from 52.9 in December 2025, according to a preliminary reading of the University of Michigan Consumer Sentiment Index for January. Consumer sentiment is still down 24.7% from a year ago.
TRUMP PLANS TO BAR INSTITUTIONAL INVESTORS FROM HOMEBUYING FACES FREE-MARKET SKEPTICISM
The preliminary numbers show that sentiment has risen for two months in a row, which is directionally good news for President Donald Trump, although sentiment will have to climb much more to get to the levels it was at about a year ago. At the end of 2024, sentiment clocked in above 70 for several months.
“All told, while consumers perceived some modest improvement in the economy over the past two months, their sentiment remains nearly 25% below last January’s reading,” survey director Joanne Hsu said. “They continue to be focused primarily on kitchen table issues, like high prices and softening labor markets.”
Inflation and cost-of-living concerns are still weighing heavily on consumers, who have been grappling with the cumulative effects of years of too-high inflation, which began spiking during the pandemic recovery under former President Joe Biden.
Year-ahead inflation expectations are running at 4.2% this month, the lowest since January 2025, but still well above the Federal Reserve’s 2% inflation target. Long-run inflation expectations increased a bit from 3.2% in December 2025 to 3.4% in January 2026, according to the survey.
Some of that upward pressure on inflation expectations is coming from Trump’s aggressive tariff agenda, which many economists warned could cause a rise in prices, although such an increase has not been as profound as many analysts had expected.
“Although consumers’ worries about tariffs appear to be gradually receding, they remain guarded about the overall strength of business conditions and labor markets,” Hsu said.
Trump’s approval ratings have taken a hit because of the discontent with the economy.
Trump’s favorability ratings went underwater in January, and the gap has since widened to about 10 percentage points, according to a RealClearPolitics aggregate of polling. A PBS News/NPR/Marist poll from December 2025 found that 57% of respondents disapproved of the president’s handling of the economy.
The dissatisfaction with the economy is also a bad sign for Republicans heading into the midterm elections, although the administration has recently been working to highlight affordability issues.
Additionally, people are worried about the labor market gradually softening.
PRIVATE SECTOR HIRING DROPS TO LOWEST RATE SINCE 2011
The economy added 50,000 jobs in December 2025, and the unemployment rate fell to 4.4%, the Bureau of Labor Statistics announced Friday. But with revisions to the numbers for October and November, the three-month moving average of job gains was minus-22,000 in December.
Private-sector job gains, though, have averaged nearly 30,000 over the past three months.
