Throughout 2025, consumer sentiment toward the economy has declined noticeably—does the end of the year bring any turnaround?
According to a preliminary report on consumer sentiment from the University of Michigan (scheduled ahead of the final December report two weeks out), consumer sentiment improved slightly month-over-month.
The closely watched index of consumer sentiment came in at 53.3. This is slightly higher than the November 2025 index of 51, a near all-time low for the index. However, to put this in perspective, this is an over 20-point decline from the December 2024 index reading of 74. Moreover, the index is structured so that any reading below 100 indicates below-average sentiment in the economy.
The University’s Surveys of Consumers Director Joanne Hsu said the increase was “concentrated primarily among younger consumers.”
“Overall, while views of current conditions were little changed, expectations improved, led by a 13% rise in expected personal finances, with improvements visible across age, income, education and political affiliation,” said Hsu.
However, Hsu stressed that these improvements are very marginal; consumers continue to see high prices as a “burden” and the expectations for the labor market are rather “dismal.”
Hsu noted that the slight lift is concentrated among better expectations about the future. The current economic conditions index, showing consumers’ view of current condition, showed a slight drop in the preliminary reading to 50.7, compared to 51.1 in the November index and 75.1 in the December 2024 index. The index of consumer expectations, meanwhile, increased from a 51 reading in November to a 55 in the preliminary December reading. (This is, though, still quite below the 73.3 December 2024 reading for consumer expectations.)
Inflation expectations for the year-ahead came in at 4.1%, down from 4.5% in November and the lowest reading since January 2025. However, short-run inflation expectations remained above the 3.3% in January, while long-run inflation expectations fell from 3.4% to the 3.2% reading seen back in January.
The latest Personal Consumption Expenditures (PCE) Index from the Bureau of Economic Analysis, delayed due to the government shutdown, found annual inflation inched up slightly to 2.8% compared to 2.6% at the beginning of the summer.
Fed members appear split on the need for a rate cut next week, though at least one key voting Fed governor has said publicly that inflation is not enough of a worry to hold rates steady. The latest PCE, showing inflation continuing away from the Fed’s goal of 2%, underlines why.
For the full survey, click here.
