U.S. consumer sentiment has fallen to a seven-month low as inflation persists and President Donald Trump promotes various economic policies, including levying tariffs on key U.S. trading partners, according to preliminary February data from the University of Michigan Surveys of Consumers.
Newsweek has reached out to the University of Michigan survey team and the White House for comment via email on Friday.
Why It Matters
The drop, which occurred across political affiliations, signals that many Americans lack confidence in the economy.
Trump, who took office on January 20, campaigned heavily on the economy, vowing to reduce inflation and impose tariffs on some of the country’s closest trading partners like Mexico and Canada, citing concerns over drugs, immigration, and trade deficits.
Tariffs are taxes on imported goods, typically paid by the importing businesses, which can then pass costs onto consumers through higher prices. The importing business could be any American company that purchases goods from foreign suppliers and brings them into the country for resale, manufacturing, or distribution. Tariffs can be used to protect domestic industries by making foreign goods more expensive and encouraging consumers to buy locally, however they can make products more expensive.
What To Know
The University of Michigan’s consumer sentiment index found Americans’ confidence in the economy is slipping on Friday, as the preliminary February index dropped to 67.8, the lowest reading since July when it was 66.4 under then-President Joe Biden. It was 71.1 in January.
Ratings of current economic conditions fell among Democrats, independents, and Republicans, indicating widespread pessimism about the economy, according to the survey.
The results come as Trump has authorized dozens of executive orders, reversing some, and launching tariffs on close trading partners. A temporary pause has been placed on the tariffs he issued on Mexico and Canada, while a 10 percent tariff remains in effect on China.
The tariffs are expected to heighten tensions between the nations and drive-up consumer prices on a range of goods.
The survey also measured consumers’ inflation expectations for this year, which rose a full percentage point from last month to 4.3 percent from 3.3 percent.
Consumer confidence had surged following Trump’s electoral victory in November against then-Vice President Kamala Harris. However, since taking office it has declined.
What People Are Saying
Survey director Joanne Hsu told Reuters in a Friday statement: “The decrease was pervasive…Furthermore, all five index components deteriorated this month, led by a 12% slide in buying conditions for durables, in part due to a perception that it may be too late to avoid the negative impact of tariff policy.”
Steven Rattner, former adviser to former President Barack Obama, journalist, and investor, wrote in an X post on Friday: “Consumer sentiment dropped among Republicans for the first time since Trump’s election win, as prices and interest rates remain high. Sentiment also continued to decline among Democrats, yielding an overall drop for the second month in a row.”
Matt Stoller, director of research at the American Economic Liberties Project, wrote in an X post, “Consumer sentiment is worsening and inflation expectations are getting worse even though the CPI [Consumer Price Index] is fine. Why? Interest rates are high. Car payments, credit card payments, student loans, mortgages aren’t in the CPI but they exist in reality.”
What Happens Next?
The University of Michigan’s final reading of consumer sentiment for the month of February will be released in two weeks.
Trump’s 25 percent tariffs on imports from Canada and Mexico are set to take effect on March 4, following a 30-day pause.
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