Consumer Sentiment Shows Hope Crashing in February

Expectations for the future took a significant turn for the worse in early February.

U.S. consumer sentiment unexpectedly declined in recent weeks, according to the University of Michigan’s survey of consumer sentiment. The index of consumer sentiment fell to 76.2 from January’s 79. Economists had forecast a slight improvement.

The loss was concentrated in the expectations component, which fell to 69.8 from 74.3.

There was also a downturn in the current conditions component among households earning less than $75,000, according to the survey’s chief economist, Richard Curtin.

“Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014,” Curtin said.

Curtin described how the pandemic economy is hitting harder at those in the bottom of the income distribution:

When asked to assess their current financial position, the deep divisions become apparent: among those with incomes in the bottom third, just 23% reported improved finances, the lowest since 2014; in contrast, among those with incomes in the top third, 54% reported their finances had improved. Mentions of income gains fell to just 17% among those in the bottom third, compared with 44% in the top income third.

Consumers have also been exposed to a lot of negative talk about the economy from President Joe Biden, Treasury Secretary Janet Yellen, and Fed chair Jerome Powell.