Consumer Sentiment Ticks Higher in January, but Confidence Remains Fragile — Evening Brief – 01.23.26 

U.S. consumer sentiment edged higher in January, signaling tentative stabilization after months of deterioration, though confidence remains deeply constrained by price pressures and economic uncertainty. The University of Michigan’s Survey of Consumers showed sentiment rising to 56.4 in the final January reading, up from 54.0 in the preliminary estimate and 52.9 in December. 

“While the overall improvement was small, it was broad based, seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike,” said Joanne Hsu, Director of the Surveys of Consumers. 

The gains reflect modest improvement in both current conditions and forward-looking expectations. The current economic conditions index rose to 55.4, up sharply from 50.4 in December, while consumer expectations increased to 57.0, from 54.6 the prior month. These moves suggest households are feeling slightly less pessimistic about near-term finances and the broader economy. 

Inflation expectations also moved lower, offering a key bright spot for policymakers. One-year inflation expectations declined to 4.0%, down from 4.2% in December and the preliminary January reading—marking the lowest level since January 2025. Five-year inflation expectations were revised to 3.3%, easing marginally from the initial estimate. 

Still, sentiment remains depressed in historical context. “National sentiment remains more than 20% below a year ago, as consumers continue to report pressures on their purchasing power stemming from high prices and the prospect of weakening labor markets,” Hsu added. 

For markets and policymakers, the combination of slightly stronger sentiment, better perceived current conditions, and gently lower inflation expectations, supports the case for a pause at next week’s FOMC meeting, but the still-depressed overall level of confidence and ongoing concerns about prices and jobs argue against assuming a fully re-energized consumer just yet.