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For the first time in six months, the American Consumer is feeling less confident.
The American consumer’s mood took a nosedive in January, snapping a six-month streak of improvement. The University of Michigan’s sentiment index dropped to 71.1, a three-month low, from December’s 74. That's an all-around bummer.
The culprits? Inflation, tariffs, and a labor market that’s starting to feel a little shaky. Consumers now expect prices to rise 3.3% over the next year (the highest rate since May btw) and 3.2% annually over the next decade. Economists are already sounding alarms about tariffs adding fuel to the inflation fire, but the Trump administration is hoping cheaper energy prices will smooth things over.
The job market isn’t providing much comfort either. Unemployed Americans are waiting longer to find work, and Trump’s promise to shrink the federal workforce looms large over regions reliant on government jobs. The result? Consumers are stockpiling now to dodge higher prices later, even as conditions for buying big-ticket items and homes keep getting worse.
Speaking of homes, the real estate market had its worst year in nearly three decades. The National Association of Realtors reported just 4.06 million previously owned homes sold in 2024, the lowest since 1995. Combine that with a rising “bad time to buy” vibe, and you’ve got a sector that’s not inspiring much confidence.
The drop in sentiment might be a blip, or the start of a trend that spells trouble for an economy still grappling with inflation, geopolitical uncertainty, and shifting labor dynamics.