Consumer sentiment dropped nearly 10% from January and has decreased for the second consecutive month.

The decline was consistent among all demographics, including age, income, and wealth. Each of the five elements of the sentiment index worsened this month, with a significant 19% decrease in the buying conditions for durable goods, partially attributed to concerns over imminent price hikes due to tariffs, stated economist Joanne Hsu, the head of the University of Michigan’s Surveys of Consumers.

Anticipations regarding personal finances and the short-term economic perspective both fell nearly 10% in February, while the long-term economic outlook regressed around 6%, reaching its lowest level since November 2023. Sentiment declined among Democrats and Independents, but remained the same for Republicans, showcasing ongoing divisions regarding the effects of new economic policies.

“Consumers’ expectations regarding inflation have significantly deteriorated this month; they are clearly preparing for a resurgence in inflation,” Hsu remarked. “An increase in inflation expectations isn’t necessarily alarming, but if such perceptions endure, it could pose challenges for policymakers. Generally, consumers expect that tariff increases will trigger heightened inflation, yet the uncertainty surrounding policy means their perceptions could shift.”

Tariff issues heighten concerns about inflation

Updates on tariffs—whether they arise from trade rhetoric or specific policy declarations from the White House—seem to be reaching consumers.

Approximately 40% of consumers spontaneously referenced tariffs, an increase from 27% last month and less than 2% before the election, Hsu noted. More crucially, consumers seem to be integrating economic policy changes into their forecasts regarding the economy’s direction.

After the January 31 announcement regarding the implementation of tariffs on China, Canada, and Mexico, inflation expectations for the upcoming year surged immediately. While the North American tariffs were suspended quite rapidly, additional tariffs were later announced, maintaining high inflation expectations.

Outlook weakens for personal finances and overall economy

Consumers expressed apprehensions about various economic factors for the upcoming year, presenting challenges for consumer sentiment and expenditure. More than half of consumers anticipate a rise in unemployment over the next year, the highest proportion since the pandemic’s economic downturn.

Perceptions of personal finances also broadly declined this month, with nearly 40% of consumers attributing high prices to the deterioration of their living standards. While a majority of consumers expect their incomes to increase, only 16% believe their income growth will outstrip inflation, illustrating further concerns regarding the price trajectory.

Consumer Sentiment Index

The Consumer Sentiment Index decreased to 64.7 in the February 2025 survey, down from 71.7 in January and below last February’s 76.9. The Current Index fell to 65.7, a decline from 75.1 in January and below last February’s 79.4. The Expectations Index dropped to 64.0, down from 69.5 in January and below last February’s 75.2.

About the surveys

The Surveys of Consumers is a rotating panel survey conducted by the University of Michigan Institute for Social Research. It is grounded in a nationally representative sample that gives each household in the contiguous U.S. an equal chance of selection. Interviews are carried out throughout the month via the web. The minimum monthly change necessary for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current Index and Expectations Index, the minimum is 6 points.