Consumer sentiment increased this month to its highest level since August as households show signs of shaking off the economic dissatisfaction and even outright despair that have gripped the United States in recent months.
Consumer sentiment rose to 56.4 in January, up from 52.9 in December 2025, according to the final reading of the University of Michigan Consumer Sentiment Index. Despite the gains, consumer sentiment is still down 21.3% from a year ago.
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The closely watched consumer sentiment gauge has now risen for two consecutive months. This shows that sentiment is starting to move in the right direction, although sentiment has been shockingly low, rivaling the depths seen in the aftermath of the global financial crisis and the worst of the bout of high inflation under former President Joe Biden. Despite relatively strong GDP growth, households have reported in recent months that they feel worse about the economy than they did in moments of severe recession and economic turmoil.
And sentiment is still much lower than when President Donald Trump entered office with his aggressive tariff agenda. At the end of 2024, sentiment clocked in above 70 for several months.
“Consumer sentiment lifted about 3.5 index points this month, with minor gains seen across all index components,” survey director Joanne Hsu said. “While the overall improvement was small, it was broad based, seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike.”
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 Biden.
Also notably in the Friday morning report, year-ahead inflation expectations fell to their lowest level since January 2025 — directionally good news for the economy.
Year-ahead inflation expectations are running at 4% this month, the lowest since January 2025, but still well above the Federal Reserve’s 2% inflation target. Meanwhile, long-run inflation expectations ticked up a bit from 3.2% in December 2025 to 3.3% in January 2026, according to the survey.
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“In comparison, readings ranged between 2.8% and 3.2% in 2024, and were below 2.8% throughout 2019 and 2020,” Hsu said.
Despite declines in overall inflation in 2025, families across the country are still expressing discontent with prices and are reporting affordability issues. That has hurt Trump’s approval ratings and has made the economy one of the top issues heading into this year’s midterm elections.
