FX.co ★ U.S. Consumer Sentiment Deteriorates More Than Previously Estimated In January

Revised figures published by the University of Michigan on Friday reveal that consumer sentiment in the United States unexpectedly declined more than initially estimated for January. The consumer sentiment index was adjusted downward to 71.1 from the preliminary figure of 73.2. Economists had anticipated the index to remain unchanged.

The index has dropped from its final December figure of 74.0, marking the first decline in six months. Joanne Hsu, Director of Surveys of Consumers, stated, "While personal finance assessments improved slightly for the fifth consecutive month, all other components of the index experienced a decline. The reduction in sentiment was widespread and affected all income, wealth, and age groups."

Hsu also noted, "Data from January gathered until Inauguration Day suggests that consumers from all political spectrums will continue to adjust their perspectives as Trump's policies become clearer and take effect."

This more significant than expected decline in the headline index is partly due to a substantial dip in consumer expectations. The index of consumer expectations fell to 69.3 in January from 73.3 in December, its lowest point since last July.

The current economic conditions index experienced a slight reduction, decreasing to 74.0 in January from December's high of 75.1. Additionally, the report indicated that year-ahead inflation expectations surged to 3.3 percent in January from 2.8 percent in December, the highest level since May 2024. Long-term inflation expectations increased to 3.2 percent in January, up from 3.0 percent in December.

Hsu commented, "Concerns about future inflation trends were evident throughout the interviews, often linked to beliefs regarding anticipated policies such as tariffs."