Consumer sentiment has dropped for the first time in months. Here’s why

U.S. consumer sentiment declined this month for the first time in six months as concerns rise regarding unemployment and the impact of potential tariffs on inflation, Bloomberg reports.

The final January sentiment index decreased to a three-month low of 71.1 and from 74 in December, according figures released by University of Michigan economists. The drop from the preliminary January reading of 73.2 included the lowest confidence among self-described Democratic voters since August 2020.

Consumers are expecting prices to climb at an annual rate of 3.2% over the next five to 10 years, up from the 3% expected in December. They see costs rising 3.3% over the next year, the highest since May, the data released Friday shows.

Several economists have issued warnings that President Donald Trump’s tariffs could drive prices higher. The administration is counting on cheaper energy to help mitigate any boost in the level of prices.

The survey also shows consumers indicate they are buying in advance to avoid future price increases.

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