The latest University of Michigan U.S. consumer sentiment survey revealed that year-ahead inflation expectations increased drastically to 3.3% — the highest reading since May 2024 — in January 2025.
This follows a range of 2.3% to 3.0% in the two years preceding the pandemic. Additionally, long-term inflation expectations rose from 3.0% last month to 3.2% this month, equivalent to November 2024.
The index consumer sentiment fell to 71.1 in January from 74.0 in December, reflecting a 3.9-percentage-point decrease month-to-month. Additionally, it is down 10.0-points year-over-year. Economists polled by Reuters forecasted a preliminary unchanged reading.
The survey showed that buying conditions for durables softened but was 30% better than six-months ago among views that purchasing in the current market would avoid potential prices increases.
In the Store: MDM’s 2024 Annual Economic Outlook Report (free for Premium)
However, concerns about unemployment rose. Approximately 47% of consumers expect unemployment to increase throughout the year — the highest since the pandemic recession.
According to the survey results, consumers expressed motives for “buying in-advance” to bypass price increases in the future. Auto and retail sales imply that consumers are acting on these views.
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