❓WHAT HAPPENED: Consumer sentiment increased for the second month in a row, surpassing economists’ expectations, as inflation expectations dropped to 3.5 percent.
👤WHO WAS INVOLVED: University of Michigan economists, American consumers, and the Trump administration.
📍WHEN & WHERE: February 6, 2025, United States.
🎯IMPACT: The data suggests positive momentum for President Donald J. Trump’s economy, despite some concerns of softening in the labor market.
U.S. consumer sentiment has climbed for the second straight month, based on the latest figures from the University of Michigan. This uptick reflects receding concerns over inflation, with year-ahead inflation expectations down from four percent in January to 3.5 percent in February.
Notably, the improvements in sentiment signal some optimistic trends for consumers, including the dip in year-ahead inflation expectations, among other key economic indicators. The National Pulse reported in late January that the Federal Reserve Bank of Atlanta, which maintains the central bank’s GDP Now tracking system, estimates that the 4th Quarter gross domestic product (GDP) in the entire United States expanded by 5.3 percent.
Although the labor market has shown signs of cooling and the inflation rate remains slightly above the Federal Reserve’s two percent target, economic forecasts suggest several successive quarters of strong growth. The U.S. economy posted its strongest quarterly growth in two years this past fall, propelled by robust consumer spending. The unemployment rate has also ticked down, dropping to 4.4 percent in December from 4.6 percent in November, per the U.S. Bureau of Labor Statistics—a historically low level.
Still, the market has been volatile in recent days, with Bitcoin plunging and key tech stocks falling. However, these appear unrelated to Trump administration policies, with the latter being attributed in large part to Anthropic revealing a new artificial intelligence (AI) tool that could render a number of current software products out of date.
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