Consumer sentiment fell for the third straight month as supply disruptions in the Strait of Hormuz continue to boost gasoline prices. Sentiment is now just below the previous historical trough seen in June 2022. The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month. Lower-income consumers and those without college degrees posted particularly strong sentiment declines; these groups are more sensitive to increases in the cost of gas and other essentials. Independents and Republicans saw decreases in sentiment, with both groups reaching their lowest readings of the current presidential administration. Meanwhile, sentiment of Democrats was little changed from last month. Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run.

Year-ahead inflation expectations inched up from 4.7% last month to 4.8% this month. The current reading substantially exceeds the 3.4% reading seen in February 2026 prior to the start of the Iran conflict, along with all 2024 readings. Long-run inflation expectations climbed from 3.5% in April to 3.9% in May, notably higher than the 2.8% to 3.2% range seen in 2024. This month’s increase in long-run expectations reflects sizable jumps among independents and Republicans. For the latter group, long-run inflation expectations are currently more than double their February 2025 reading on a monthly basis.

Consumer sentiment was essentially unchanged this month, coming in a scant 1.6 index points below April’s reading and comparable to the trough reached in June 2022. While the expectations index inched up, current conditions fell back about 9%, owing to a surge in concerns about high prices both for personal finances as well as buying conditions for major purchases. Real income expectations continued a decline that began in March. About one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs. Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump. Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall.

Year-ahead inflation expectations softened a touch from 4.7% last month to 4.5% this month. The current reading still substantially exceeds the 3.4% reading seen in February prior to the start of the Iran war, along with all 2024 readings and the 2.3-3.0% range seen in the two years pre-pandemic. Long-run inflation expectations inched down from 3.5% in April to 3.4% in May. In 2024, values ranged between 2.8% and 3.2%, while in 2019-2020, they were consistently below 2.8%.

Consumer sentiment ticked down 3.5 index points this month, now comparable to the trough seen in June 2022. Decreases in sentiment were seen across political party, income, age, and education. Expected business conditions declined for both short and long time horizons, nearly matching year-ago readings when the reciprocal tariff regime was implemented. After the two-week cease-fire was announced and gas prices softened a touch, sentiment recovered a modest portion of its early-month losses. The Iran conflict appears to influence consumer views primarily through shocks to gasoline and potentially other prices. In contrast, military and diplomatic developments that do not lift supply constraints or lower energy prices are unlikely to buoy consumers.

Year-ahead inflation expectations surged from 3.8% in March to 4.7% this month, the largest one-month increase since April 2025. The current reading exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years pre-pandemic. After hovering between 3.2 and 3.3% for the previous four months, long-run inflation expectations climbed to 3.5% in April, the highest reading since October 2025. In 2024, values ranged between 2.8% and 3.2%, while in 2019 and 2020, they were consistently below 2.8%.

Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago. Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall. One-year expected business conditions plunged about 20% and is now 6% below last April. Assessments of personal finances declined about 11%, with consumers expressing a substantial increase in concerns over high prices and weaker asset values. Buying conditions for durables and vehicles worsened, again on the basis of high prices. Open ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy. Note that 98% of interviews were completed prior to the April 7th announcement of a temporary cease-fire. Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated.

Year-ahead inflation expectations surged from 3.8% in March to 4.8% this month, the largest one-month increase since April 2025 (see chart, black dashed line and black circle). The current reading exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years pre-pandemic. Long-run inflation expectations ticked up from 3.2% last month to 3.4% this month, the highest reading since November 2025. In 2024, values ranged between 2.8% and 3.2%, while in 2019 and 2020, they were consistently below 2.8%.

Consumer sentiment fell back 6% this month to its lowest level since December 2025. Declines were seen across age and political party. Consumers with middle and higher incomes and stock wealth, buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment. Overall, the short-run economic outlook plunged 14%, and year-ahead expected personal finances sank 10%, while declines in long-run expectations were more subdued. These patterns suggest that, at this time, consumers may not expect recent negative developments to persist far into the future. These views are subject to change, however, if the Iran conflict becomes protracted or if higher energy prices pass through to overall inflation. Interviews for this release were collected between February 17 and March 23, with about two-thirds completed after the start of the US military conflict in Iran.

Year-ahead inflation expectations climbed from 3.4% in February to 3.8% this month, the largest one-month increase since April 2025. The current reading exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years pre-pandemic. Long-run inflation expectations inched down to 3.2%. In 2024, values ranged between 2.8% and 3.2%, while in 2019 and 2020, they were consistently below 2.8%. Note that for both time horizons, interviews completed after February 28th exhibited higher inflation expectations than those completed before that date (see chart, right panel).

Consumer sentiment dipped about 2%, reaching its lowest reading of the year. Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains. Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain. A broad swath of consumers across incomes, age, and political affiliation all reported declines in expectations for their personal finances, down 7.5% nationally. Interviews for this release were collected between February 17 and March 9, with about half completed after the start of the US military conflict in Iran.

This month, year-ahead inflation expectations ended six months of consecutive declines, stalling at 3.4%. The current reading exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years pre-pandemic. Long-run inflation expectations inched down to 3.2%. In 2024, readings ranged between 2.8% and 3.2%, while in 2019 and 2020, they were consistently below 2.8%. Note that for both time horizons, interviews completed after February 28th exhibited higher inflation expectations than those completed before that date (see chart, right panel).

The University of Michigan Consumer Sentiment Index was 56.6 in Feb 2026 (+0.4% MoM; -12.5% YoY), essentially unchanged from the prior month but below the preliminary February reading of 57.3.

• Current Economic Conditions Index rose to 56.6 (+2.2% MoM; -13.9% YoY), showing modest improvement in present assessments despite weaker YoY readings.

• Index of Consumer Expectations fell to 56.6 (-0.7% MoM; -11.6% YoY), indicating slightly softer forward views relative to January.

• About 46% of consumers cited high prices harming finances, extending a seven-month stretch above 40%, suggesting persistent price pressures in perceptions.

• Sentiment divergence widened as higher-income, college-educated, and stock-owning households improved while lower-income and non-stockholders declined, leaving aggregate sentiment flat.

• Year-ahead inflation expectations declined to 3.4% (vs 3.5% preliminary reading) from 4.0%), the lowest since Jan 2025 but still above the pre-pandemic 2.3% to 3.0% range.

• Long-run inflation expectations were steady at 3.3% (vs 3.4% preliminary reading), slightly above the 2024 range of 2.8% to 3.2% and above sub-2.8% levels in 2019 to 2020.

• Inflation uncertainty fell to its lowest since Dec 2024 (short run) and Oct 2024 (long run), indicating narrowing dispersion in expectations.

The preliminary UMich Index of Consumer Sentiment edged up +1.6% MoM to 57.3 in February 2026 while remaining -11.4% YoY, showing modest improvement but still historically weak confidence.

• The headline sentiment index rose from 56.4 in January to 57.3 in February (+1.6% MoM), marking the highest level since August 2025, though gains were described as small and within the margin of error.

• The Current Economic Conditions Index increased to 58.3 (+5.2% MoM; -11.3% YoY), indicating improved views of present finances and buying conditions relative to January.

• The Index of Consumer Expectations slipped to 56.6 (-0.7% MoM; -11.6% YoY), reflecting a slight deterioration in outlook for longer-run business conditions.

• Overall sentiment remained about 20% below January 2025 levels, underscoring continued weakness compared with last year despite recent stabilization.

• Sentiment rose sharply among consumers with large stock portfolios but stagnated at very low levels for those without stock holdings, pointing to uneven confidence across wealth groups.

• Year-ahead inflation expectations declined to 3.5% (Jan: 4.0%), the lowest since January 2025, though still above pre-pandemic ranges.

• Long-run inflation expectations edged up to 3.4% (Jan: 3.3%), remaining above 2024 levels and well above readings seen in 2019 to 2020.

The University of Michigan’s Index of Consumer Sentiment rose to 56.4 in January 2026 (+6.6% MoM; -21.3% YoY), revised up from the preliminary estimate of 54.0.

• The Current Economic Conditions Index increased to 55.4 (+9.9% MoM; -26.2% YoY), indicating a broad-based monthly improvement in assessments of present conditions despite large YoY deterioration.

• The Index of Consumer Expectations rose to 57.0 (+4.4% MoM; -18.0% YoY), pointing to slightly firmer forward-looking views even as expectations remain below year-ago levels.

• Overall sentiment improved by about 3.5 points, with minor gains across all components, suggesting the monthly rise was not concentrated in one category.

• The sentiment uptick was broad-based across income, education, age, and political affiliation, indicating widespread (though small) improvement across demographic groups.

• Despite the MoM gains, sentiment remained more than 20% below a year ago, with consumers citing pressure on purchasing power from high prices and the prospect of weakening labor markets as ongoing headwinds.

• Year-ahead inflation expectations fell to 4.0%, the lowest reading since January 2025 but still above the 3.3% level recorded then, implying near-term inflation concerns eased but remain elevated versus last year.

• Long-run inflation expectations increased to 3.3% (from 3.2% in December), moving further above the 2024 range of 2.8% to 3.2% and remaining well above sub-2.8% levels seen in 2019 to 2020.

• Short-run inflation uncertainty declined from mid-2025 but remained elevated and comparable to 2022 levels, indicating dispersion in inflation expectations is still relatively high.

January 2026 Update: Current versus Pre-Pandemic Long-Run Inflation Expectations

The preliminary UMich Index of Consumer Sentiment rose to 54.0 in January (+2.1% MoM, -24.7% YoY), marking a second straight monthly gain but still reflecting significantly weaker confidence than a year earlier.

• The headline index increased from 52.9 in December to 54.0 in January, the highest level since September 2025, indicating modest recent improvement in overall sentiment.

• The Current Economic Conditions Index rose to 52.4 (+4.0% MoM, -30.2% YoY), showing a small improvement in perceptions of present conditions while remaining deeply negative compared with last year.

• The Index of Consumer Expectations edged up to 55.0 (+0.7% MoM, -20.9% YoY), suggesting slightly better views of the outlook, though expectations remain well below early-2025 levels.

• Gains in January were concentrated among lower-income consumers, while sentiment declined for higher-income households, pointing to uneven improvements across income groups.

• Despite two months of improvement, overall sentiment remains nearly 25% below January 2025, with respondents continuing to cite high prices and softening labor markets as primary concerns.

• Year-ahead inflation expectations held steady at 4.2%, the lowest since January 2025 but still well above the 3.3% level recorded a year earlier.

• Long-run inflation expectations rose slightly to 3.4% (Dec: 3.2%), remaining above the 2.8–3.2% range seen in 2024 and pre-pandemic norms.

The University of Michigan’s Index of Consumer Sentiment rose to 52.9 in December 2025 (+3.7% MoM; -28.5% YoY), showing a modest monthly improvement but still deeply depressed versus last year.

• The Current Economic Conditions Index slipped to 50.4 (-1.4% MoM; -32.9% YoY), indicating continued deterioration in assessments of present financial and buying conditions.

• The Index of Consumer Expectations increased to 54.6 (+7.1% MoM; -25.5% YoY), reflecting firmer views on personal finances and business conditions despite weak overall sentiment.

• Sentiment gains were concentrated among lower-income consumers, while higher-income consumers’ sentiment was little changed, pointing to uneven improvements across income groups.

• Buying conditions for durable goods fell for a fifth consecutive month, highlighting ongoing pressure from prices and financing conditions.

• Labor market expectations improved slightly, though 63% of consumers still expect unemployment to rise over the next year, keeping outlooks cautious.

• Year-ahead inflation expectations declined to 4.2%, the fourth consecutive monthly drop and the lowest reading in 11 months, though still above the 3.3% level seen in January.

• Long-run inflation expectations eased to 3.2%, matching the January 2025 reading and remaining above the 2.8–3.2% range observed last year.