Economy: Consumer Sentiment: FINAL Results for February 2025

The University of Michigan's Index of Consumer Sentiment (ICS) - FINAL Results for February 2025 was released today:

Predicted: 70.0

Actual: 64.7

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Change from Previous Month: -9.76% (-7.0 points)

Change from 12 Months Previous: -15.86% (-12.2 points)

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Final ICS Reading for January 2025: 71.7
Final ICS Reading for February 2024: 76.9

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From Today's Report:

"...Consumers sentiment extended its early month decline, sliding nearly 10% from January.

The decrease was unanimous across groups by age, income, and wealth. All five index components deteriorated this month, led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent.

Expectations for personal finances and the short-run economic outlook both declined almost 10% in February, while the long-run economic outlook fell back about 6% to its lowest reading since November 2023.

While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies.

Year-ahead inflation expectations jumped up from 3.3% last month to 4.3% this month, the highest reading since November 2023 and marking two consecutive months of unusually large increases.

The current reading is now well above the 2.3-3.0% range seen in the two years prior to the pandemic.

Long-run inflation expectations rose over the course of the month and climbed from 3.2% in January to 3.5% in February. This is the largest month-over-month increase seen since May 2021.

For both short- and long-run inflation expectations, this month’s increases were widespread and seen across income and age groups. Inflation expectations rose this month for Independents and Democrats alike; they fell slightly for Republicans..."

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CHART: Consumer Sentiment Slides Amid Concerns
About Future Inflation - February 2025 FINAL UPDATE

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The ICS is derived from the following five survey questions:

"We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"
"Now looking ahead, do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"
"Now turning to business conditions in the country as a whole, do you think that during the next twelve months we'll have good times financially, or bad times, or what?"
"Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"
"About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"

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Click here for more on how the ICS is calculated.

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The ICS uses a 1966 baseline, i.e. for 1966, the ICS = 100. So any number that is below the 1966 baseline of 100 means that the folks who were polled recently aren't as optimistic about the U.S. economy as those polled back in 1966.

The ICS is similar to the Consumer Confidence Index in that they both measure consumer attitudes and offer valuable insight into consumer spending.

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The "predicted" figure is what economists were expecting, while the "actual" is the true or real figure.

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