The University of Michigan’s consumer sentiment index was revised up to 56.4 in January 2026, from a preliminary 54.0 and December’s 52.9. This marks a second straight monthly increase and the highest reading since August, with modest gains recorded across all major components of the index. Although the improvement was incremental, it was notably broad based, spanning income levels, educational attainment, age groups, and political affiliations. That said, overall sentiment remains more than 20% below its level a year ago. Consumers continue to cite strains on purchasing power from elevated prices, alongside growing concerns about a potential softening in labor market conditions. Beyond tariff policy, foreign developments appear to have little influence on consumers’ economic perceptions. Year-ahead inflation expectations declined to 4.0%, the lowest level since January 2025, while longer-run inflation expectations edged up slightly to 3.3% from 3.2% in December.
