Dive Brief:
- Consumer sentiment fell in February to its lowest point since July 2024, according to a Wells Fargo note shared with Retail Dive.
- Consumers now expect the inflation rate to rise to 4.3%, up from 3.3% the previous month, making for two consecutive months of “uncharacteristically high jumps” in short-term inflation expectations. Two months ago, consumers said they expected an inflation rate of 2.8% over the next year, according to the report.
- Consumers anticipate that long-term inflation will rise to 3.3%, up slightly from 3.2% last month. Though that may not appear to be a dramatic increase in inflation expectations, the figure is elevated compared to the pre-pandemic range, the report said.
Dive Insight:
As President Donald Trump’s new administration takes shape, Americans across the political spectrum are feeling wary. Wells Fargo economists found that consumer sentiment fell across political affiliations.
The consumer sentiment survey was taken between Jan. 21 and Feb. 3, coinciding with President Trump’s announcement of 25% tariffs on Canadian and Mexican imports and a 10% tariff on Chinese goods. However, given that the U.S. has since paused tariffs for 30 days with Canada and Mexico, the report noted that the circumstances may change in the next month.
“It’s not just actual policy but the prospect of changes in those policies that can dictate economic behavior,” the economists wrote.
The Wells Fargo report echoes other recent consumer sentiment surveys. Business think tank The Conference Board found that consumer confidence in January declined for the first time in six months, dropping almost 4% from December and 10% from a year ago. Job and inflation concerns drove the declines, per that report.
Research suggests that consumers may adjust their consumption habits if inflation continues to weigh down their spending power. In a survey commissioned by Forter and conducted by Talker Research released last June, 61% of respondents said they changed their online shopping habits due to higher prices. Nearly 90% of respondents said their cost of living had increased during the past five years.
