Economic outlooks brightened slightly this month across most consumer segments, new survey data released Friday by the University of Michigan shows.
The university’s index of consumer sentiment rose 3.5 points to land at 56.4 in January, a 6.6% gain from December but a more than 21% decline from last January. High prices combined with concerns over the weakening labor market continue to pressure outlooks.
The improvement was broad-based, however, “seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike,” noted Joanne Hsu, director of Surveys of Consumers at the university, in a statement released with the survey results.
The monthly index assesses evolving consumer attitudes on current and future business conditions, personal finances, job prospects, wages and inflation.
Among component indexes, consumer outlooks on current economic conditions experienced the sharpest monthly rise, up nearly 10% from December though down 26% from a year ago. Attitudes toward future economic conditions improved 4.4% from December but still landed 18% below last January’s levels.
“Aside from tariff policy, consumers do not appear to be connecting foreign developments to their views of the economy,” said Hsu, adding the caveat that survey responses concluded on Jan. 19, two days after President Donald Trump threatened to slap tariffs on eight U.S. trading partners in Europe over their objections to the potential U.S. annexation of Greenland.
Inflation expectations among consumers retreated to 4% in January but remained elevated relative to last January, when year-ahead inflation expectations were 3.3%.
“Long-run inflation expectations inched up from 3.2% last month to 3.3% this month,” noted Hsu.
Officials at the Federal Reserve will convene next week for their first policy meeting of 2026, which is not expected to produce any change in the federal funds rate, which is the discounted overnight rate at which depositories lend and borrow between themselves.
Common measures of inflation show consumer prices are still rising at a pace well above the Fed’s stated 2% target. But the labor market has not exhibited signs of accelerating weakness, softening calls for additional rate cuts to bolster job creation while supporting financial markets’ expectations for a pause in rate cuts until March.
