UMich Confidence Rebounds In January Off Record Lows As Tariff Fears Abate

Having ended 2025 at the lowest Current Conditions Sentiment levels in, well, ever… expectations for preliminary January data were for a modest rebound… and it did (very modestly).

• The preliminary January sentiment index climbed to 54 from 52.9 in December, according to the University of Michigan (better than the 53.5 expected).

• The expectations index rose to a five-month high of 55. The survey reflected improvements in both the short- and long-term economic outlooks.

• The current conditions gauge climbed to a three-month high after slipping to a record-low in December. Consumers’ perception of their current financial situation improved in January, while expectations declined.

Source: Bloomberg

Short-term inflation expectations were flat while longer-term rebounded modestly…

Source: Bloomberg

Democrats appear to be slowly but surely realizing all the Trump tariff fears projected up on them were just wrong. Republicans appear to be primed for deflation – but the gap remains huge (1% vs 5%)…

Source: Bloomberg

On a longer term basis, Democrats really abandoned their fears… Rather oddly, all of the political cohorts saw longer-term inflation expectations lower BUT overall inflation expectations rose on the month?

Source: Bloomberg

If Democrats are right, shit’s about to get real…

Source: Bloomberg

The always unbiased UMich commentary makes sure to balance the positives of an admission that tariffs fears tumbled with some subjective view of the economy (as sentiment improved)

“Although consumers’ worries about tariffs appear to be gradually receding, they remain guarded about the overall strength of business conditions and labor markets,’’ Joanne Hsu, director of the survey, said in a statement.

The Michigan survey showed consumer views on the labor market remain soft, with nearly two-thirds expecting unemployment to rise in the year ahead. Concerns about joblessness have been worse among higher-educated and higher-income Americans than for other consumers.

UMich also makes a point of noting that more than 90% of interviews for this release were collected prior to the capture of Maduro in Venezuela.