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U.S. Consumer Sentiment Edges Up to 53.3 but Remains Muted as Inflation and Tariffs Weigh

10:53 PM, 12/05/2025
U.S. Consumer Sentiment Edges Up to 53.3 but Remains Muted as Inflation and Tariffs Weigh

The University of Michigan's preliminary consumer sentiment index rose to 53.3 from 51 in November, beating expectations but staying far below January's 71.7. Consumers reported slightly weaker views of current conditions while outlooks for the year ahead improved modestly. One-year inflation expectations fell to 4.1% even as average U.S. tariff rates spiked to 16.8% according to Yale's Budget Lab. Joanne Hsu noted that high prices continue to weigh on households.

The University of Michigan's preliminary consumer sentiment index nudged higher this month to 53.3 from a final November reading of 51, topping economists' 52 forecast but remaining far below the 71.7 level seen in January.

Households' assessments of current economic conditions slipped slightly, even as their expectations for the year ahead improved modestly. The mixed picture suggests consumers remain cautious despite the small uptick in confidence.

Inflation Outlook Eases, But Price Pressures Persist

One-year inflation expectations declined to 4.1% from 4.5% in the prior month — the lowest year-ahead reading since January. While inflation has moved down from the peaks of mid-2022, it remains well above the Federal Reserve's 2% target and continues to weigh on household sentiment.

Tariffs Add Another Layer of Risk

The report highlights rising import costs as a potential source of future price pressure. Economists note that importers often absorb tariff costs initially and then attempt to pass them on to consumers through higher prices. According to calculations from the Budget Lab at Yale University, the average U.S. tariff rate has climbed from 2.4% in January to 16.8% last month — the highest level since 1935. The increase followed a period of sweeping tariff threats earlier in the year and later negotiations with major trading partners.

Joanne Hsu, Director of the Michigan Economic Surveys, said: "The overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices."

Overall, the preliminary index signals a modest improvement in mood but underscores persistent concerns about inflation and the potential pass-through of tariff-related costs to consumers. Policymakers and markets will watch whether the easing in short-term inflation expectations is sustained.

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