Consumer sentiment in the United States has started 2026 on a precarious note, largely influenced by ongoing concerns regarding inflation and job stability. The University of Michigan revealed a consumer sentiment index reading of 54 in its preliminary data for January, marking a significant decline and approximately 30 points below the survey’s historical average spanning over 70 years. This figure is perilously close to the all-time low of 50, recorded in June 2022 during the peak of pandemic-era inflation.
The survey’s findings come at a time when consumer confidence appears to be wavering. Following a brief post-election high of 74 in December 2024, sentiment has been on a downward trajectory, coinciding with the unveiling of former President Donald Trump’s tariff proposals. Although sentiment has shown slight improvement over the past two months, it still lags behind levels recorded a year ago by nearly 25%.
Joanne Hsu, the director and chief economist of the University of Michigan survey, noted that despite the recent uptick, historical comparisons reveal that current ratings remain low. She stated, “So, we’re at the highest reading in four months, but these are still, historically speaking, rather low ratings.” The survey gauges public perception regarding business conditions, personal finances, and purchasing conditions, reflecting the economic mood of the nation.
The grim outlook is not isolated to the University of Michigan findings. The Conference Board’s recent survey indicated that consumer confidence has weakened for five consecutive months. Additionally, Gallup’s Economic Confidence Index has dropped to a 17-month low. Hsu emphasized that worries about essential expenses are predominant, with nearly half of survey respondents citing high prices as a significant burden on their personal finances.
Despite the current annual inflation rate being reported at 2.7%, down from its peak in recent years, the cumulative effect of rising prices over the last five years—approximately 25%—continues to weigh heavily on consumers’ minds. Hsu remarked that inflation concerns dominate consumer sentiment, even though the immediate inflation rate is not at record levels.
Concerns over tariffs, which previously heightened inflation anxiety, have eased slightly. Hsu indicated that for the first time in months, less than half of survey participants mentioned tariffs spontaneously. “Last April and May, consumers were really expecting a worst-case scenario resulting from the gyrations in tariff policy,” she noted, adding, “Things seem to have calmed down a little bit.”
Looking ahead, the survey revealed that consumer expectations for inflation over the next year are stable at 4.2%, the lowest level in nearly a year, although this figure remains higher than the 3.3% recorded in January 2025. The data also revealed a divergence in sentiment based on income levels, with lower-income consumers reporting slight improvements while those in higher-income brackets experienced a decline in confidence.
“Even upper-income, upper, high-educated consumers are down on the labor market,” Hsu pointed out, indicating a widespread concern about job stability. Although job security remains strong, hiring rates are at a low, complicating the situation for job seekers. A government report released shortly before the survey indicated that job growth was sluggish at the end of 2025, marking the weakest growth since 2020.
As consumer sentiment continues to fluctuate, experts suggest that perceptions of the labor market and the hope for cooling inflation will play vital roles in shaping attitudes throughout 2026. Hsu concluded by emphasizing the importance of monitoring these trends as they develop, stating, “Consumer sentiment in 2026 might hinge on perceptions of the jobs market, along with hopes for cooler inflation.”
