The latest University of Michigan U.S. consumer sentiment survey revealed that year-ahead inflation expectations increased drastically to 4.3% in February — the highest reading since November 2023.
The monthly reading was well above the range of 2.3% to 3.0% in the two years preceding the COVID-19 pandemic. Additionally, long-term inflation expectations rose from 3.2% in January to 3.5% in February, marking two consecutive monthly large increases.
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The index for consumer sentiment fell to 64.7 in February from 71.7 in January, reflecting a 9.8-percentage-point decrease month-to-month. Additionally, February’s mark was down 15.9 points year-over-year. Economists polled by Reuters forecasted a preliminary reading of 67.8 in February.
The survey showed that buying conditions for durables plunged by 19% in February month-to-month, largely due to fears that tariff-induced price increases were imminent.
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Expectations for personal finances and short-run economic outlook both saw decreases in February of almost 10% month-to-month. The long-run economic outlook declined by around 6% to its lowest level since November 2023.
According to the survey results, both short and long-run inflation expectations saw increases amongst a variety of incomes and age groups.
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