Improvement masks growing economic divide
U.S. consumer sentiment climbed to its highest level in six months in February, marking a third consecutive monthly increase. The uptick, however, masked persistent concerns about job security and rising living costs, highlighting widening disparities across income groups.
The latest reading suggests that confidence is stabilizing rather than rebounding sharply, as higher-income households show resilience while financially vulnerable consumers continue to face pressure.
Wealthier households drive the rebound
Data from the University of Michigan’s Surveys of Consumers showed the Consumer Sentiment Index rising to 57.3 in February from 56.4 in January, exceeding market expectations. Despite the improvement, sentiment remains roughly 20% below levels seen at the start of 2025.
The gains were concentrated among consumers with significant stock market exposure, underscoring a K-shaped economic pattern in which asset-owning households benefit from financial market strength while others struggle to keep pace.
Labor market concerns persist
Anxiety around employment prospects remains widespread. Survey respondents continued to cite fears of job losses and erosion of personal finances due to elevated prices, particularly those without equity investments.
Broader labor market indicators reinforce these concerns. Government data released this week showed job openings falling to their lowest level in more than five years in December, reducing opportunities for unemployed workers.
Mixed political and confidence signals
Sentiment improved among consumers identifying with both major political parties, while confidence slipped among independents. The rise contrasts sharply with other measures of household attitudes, as separate consumer confidence data released earlier showed a significant deterioration.
Together, the surveys point to growing apathy and caution surrounding labor conditions, even as headline sentiment indicators stabilize.
Inflation expectations show short-term relief
Consumers reported some easing in near-term inflation expectations. Anticipated inflation over the next 12 months fell to 3.5%, the lowest level in over a year, suggesting households believe the worst price effects linked to import tariffs may be fading.
Longer-term inflation expectations edged higher, however, reflecting lingering concern about structural price pressures over the next five years.
Limited implications for monetary policy
Economists noted that while sentiment appears to have bottomed out, the pace of improvement is unlikely to influence near-term central bank decisions. Attention remains focused on upcoming employment data, which is expected to play a larger role in shaping monetary policy decisions in the coming months.
