U.S. consumer confidence showed little improvement in February, underscoring the persistent impact of inflation on household finances. The University of Michigan’s final February Consumer Sentiment Index came in at 56.6, barely changed from January and well below last year’s reading near 65. Economists had expected a modestly stronger figure, but the data instead reflected a public still uneasy about costs, borrowing conditions, and economic direction.
The survey, conducted before the Supreme Court struck down a broad swath of President Trump’s tariffs, paints a picture of consumers feeling stuck. While job growth has remained resilient and equity markets have hovered near highs, everyday expenses, from groceries to housing, continue to shape perceptions more than macro headlines.
High Prices Remain the Key Concern
Nearly half of surveyed consumers, 46%, cited high prices as the key strain on their finances, a figure that has remained elevated for months. Sentiment is roughly 13% below year-ago levels and more than 20% below early 2025 readings, suggesting that price fatigue has become embedded in household psychology. Inflation expectations, however, showed some improvement. One-year inflation forecasts declined to 3.4% from earlier February estimates near 4%, marking the lowest level since early 2025. Still, that remains well above the pre-pandemic norm of roughly 2% to 3%, while long-term inflation expectations held steady at 3.3% — signaling that consumers still believe elevated prices could linger.
Inflation Data Complicates the Picture
Broader economic data released this week added nuance. While headline GDP growth has slowed, core inflation readings remain sticky, reinforcing the Federal Reserve’s cautious stance on interest-rate cuts. Policymakers have signaled that they are in no rush to ease further until inflation convincingly returns to target. That backdrop matters for sentiment. Higher borrowing costs continue to pressure credit card balances, auto loans, and mortgages, even as mortgage rates have eased modestly from their recent peaks. Consumers appear caught between solid employment conditions and persistent affordability challenges.
Could the Supreme Court Decision Change the Mood?
Friday’s Supreme Court ruling, which struck down tariffs imposed under emergency powers, introduces a potential turning point. If the decision ultimately leads to lower import costs or rebate payments to businesses and consumers, it could help ease pricing pressure in certain categories.
However, any relief will take time to filter through supply chains and retail pricing. Additionally, some tariffs imposed under separate legal authorities remain in place, limiting the immediate impact. Still, analysts note that even the perception of reduced trade uncertainty can support financial markets and consumer confidence.
Looking Ahead
The trajectory of consumer sentiment will hinge on whether inflation expectations continue to moderate and whether tariff-related relief translates into tangible price improvements. Upcoming inflation readings and Federal Reserve communications will be critical in shaping rate-cut expectations, while any measurable decline in everyday costs could offer psychological support to households. For now, confidence remains fragile — but with inflation expectations edging lower and policy uncertainty easing slightly, the foundation for gradual improvement may be forming.