U.S. consumer confidence in January reached a four-month high, with inflation expectations relatively stable

As concerns about tariffs gradually fade, American consumers have a slightly more optimistic view of the economy, with recent consumer confidence showing a rebound.

Data released by the University of Michigan shows that the preliminary consumer confidence index for the U.S. in January is 54, expected 53.5, previous value 52.9. This survey covers responses from participants between December 16 and January 5, and the reading is slightly above the median expectation of economists in media surveys.

In terms of sub-indices, the expectations index rose to 55, reaching a five-month high, reflecting an improvement in consumers' views on both short-term and long-term economic prospects. The current conditions index rebounded to a three-month high in January after falling to a historical low in December.

Data released on Friday also showed that consumers expect prices to rise at an annual rate of 4.2% over the next year, unchanged from last month, with an expectation of 4.1%; while the inflation expectation for the next 5 to 10 years is an average of 3.4%, in line with expectations, up from 3.2% the previous month.

High living costs, along with concerns about limited job opportunities and wage growth prospects, have kept consumer confidence hovering near historical lows. Meanwhile, consumer spending continues to show resilience and remains a driving force for the economy.

Joanne Hsu, the head of the University of Michigan survey, stated in a release: "Although concerns about tariffs seem to be gradually diminishing, consumers remain cautious about the overall business environment and the strength of the labor market."

Data released on the same day regarding non-farm employment showed that job growth in December fell short of expectations, indicating that the U.S. labor market remains fragile, despite a slight decrease in the unemployment rate to 4.4%.

The University of Michigan survey indicates that consumers' views on the labor market remain weak, with nearly two-thirds of respondents expecting the unemployment rate to rise over the next year. Among Americans with higher education and income levels, concerns about unemployment are more severe than among other consumers.

To prevent a rapid deterioration of the labor market, the Federal Reserve has consecutively lowered interest rates in its last three policy meetings in 2025. However, the market generally expects the Federal Reserve to maintain interest rates later this month to further assess inflation and employment data. Current price pressures have eased somewhat, but inflation remains above the Federal Reserve's 2% target.

Additionally, consumers' views on their current financial situation improved in January, but expectations for the future have declined