Consumer sentiment has started 2026 on a concerning note, with inflation and job security dominating Americans’ worries. The University of Michigan’s Consumer Sentiment Index recorded a preliminary reading of 54 in January, a significant drop of approximately 30 points below the survey’s historical average, which has persisted for over 70 years. This figure is alarmingly close to the all-time low of 50, reached in June 2022 during the peak of inflation related to the pandemic.
The January results, released on January 6, 2026, come after a brief post-election high of 74 in December 2024, which quickly deteriorated in the wake of President Donald Trump‘s tariff announcements. Although sentiment has increased for two consecutive months, it remains around 25% lower than this time last year.
Joanne Hsu, the director and chief economist of the survey, commented, “We’re at the highest reading in four months, but these are still, historically speaking, rather low ratings.” The University of Michigan’s survey gauges public perceptions on business conditions, personal finances, and buying conditions, reflecting the broader economic mood in the country.
Consumer Confidence Declines Across Multiple Surveys
The pessimistic outlook is not unique to the University of Michigan survey. The Conference Board reported a fifth consecutive month of weakened consumer confidence. Similarly, Gallup’s Economic Confidence Index has dipped to its lowest point in 17 months. Many Americans continue to express deep concerns regarding rising prices, with nearly half of respondents identifying high costs as a primary issue affecting their financial stability.
Hsu highlighted that inflation concerns are central to consumer sentiment, stating, “High prices are really dominating views of consumers,” despite the current annual inflation rate being reported at 2.7%—a decrease from previous highs. Over the last five years, overall prices have surged by about 25%, contributing to widespread anxiety. While some fears regarding tariffs have lessened, with fewer than half of respondents spontaneously mentioning them for the first time in months, apprehensions about potential inflation from tariffs remain.
The survey also found that inflation expectations for the upcoming year are steady at 4.2%, the lowest in nearly a year but still above last January’s 3.3%. Hsu noted that sentiment among lower-income consumers has shown slight improvement, while those with higher incomes have reported a decline in their outlook.
Job Market Dynamics and Consumer Sentiment
The notion of a “K-shaped” economy, where lower-income individuals disproportionately feel the effects of inflation while wealthier households fare better, continues to be a topic of discussion. Hsu cautioned, however, that the recent improvements for lower-income respondents might not sustain through the month. “These changes are really small right now,” she said.
The labor market remains a significant factor influencing consumer sentiment. A report released on the same day indicated that job growth remained subdued at the end of 2025, marking the weakest growth period since 2020. While job security appears stable for many workers, the overall hiring rate has been notably low, complicating the situation for job seekers.
Hsu emphasized that perceptions of the job market and expectations for inflation will play a critical role in shaping consumer sentiment as 2026 progresses. The ongoing economic landscape will likely determine how consumers feel about their financial futures in the months to come.
