The University of Michigan's final consumer sentiment reading for December landed at 52.9—a slight improvement from November's 51.0, but a staggering 28.5% decline from the 74.0 recorded in December 2024. The collapse in confidence represents one of the most dramatic year-over-year deteriorations since the survey's inception.

The Numbers

Both components of the index tell the same story:

  • Current Conditions Index: 50.4, down from 75.1 a year ago (-32.9%)
  • Expectations Index: 54.6, down from 73.3 a year ago (-25.5%)

"This is a very, very substantial decline over a relatively short period of time," noted Joanne Hsu, director of the survey of consumers.

What's Driving the Gloom

Inflation anxiety remains elevated: Nearly half of consumers—47%—spontaneously mentioned that high prices are weighing on their personal finances. This figure is unchanged from November and well above the 35% recorded a year ago. Even as official CPI readings moderate, the cumulative price increases of the past three years continue to burden household budgets.

Job market concerns are rising: About 63% of consumers expect unemployment to worsen in the year ahead, compared to 40% a year ago. The labor market has cooled from its red-hot 2024 levels, and workers are noticing.

Buying conditions deteriorating: Conditions for purchasing durable goods—cars, appliances, furniture—fell for the fifth consecutive month. When big-ticket items feel unaffordable, consumers pull back.

The Inflation Expectations Paradox

One-year inflation expectations came in at 4.2%—the lowest reading in 11 months, but still well above the 3.3% seen in January. Long-term (5-year) expectations held steady at 3.2%.

The paradox: consumers expect inflation to moderate but still feel crushed by existing price levels. The Federal Reserve may have won the inflation war in terms of monthly readings, but the household balance sheet tells a different story. Prices haven't fallen; they've simply stopped rising as fast.

Implications for the Economy

Consumer spending drives roughly 70% of U.S. GDP. When sentiment collapses this dramatically, it typically signals one of two outcomes: either consumers retrench and spending slows, or the survey is failing to capture actual behavior.

Recent evidence suggests the latter—retail sales have remained resilient even as sentiment cratered. This "say-do gap" has puzzled economists throughout 2025. Americans report feeling terrible about the economy while continuing to shop, travel, and dine out.

Political Undertones

Consumer sentiment surveys have become increasingly polarized along partisan lines. When the party in power changes, sentiment among supporters tends to surge while opponents' confidence collapses—independent of actual economic conditions. This political noise makes the data harder to interpret as a pure economic signal.

What to Watch

The disconnect between sentiment and spending cannot persist indefinitely. Either confidence will recover as inflation fades further from memory, or consumers will eventually translate their pessimism into reduced spending. The January 2026 retail sales report—due in mid-February—will offer the next major data point.

The Bottom Line

Consumer sentiment at 52.9 reflects an American public that feels battered by three years of price increases, anxious about job security, and uncertain about the future. Whether this pessimism translates into behavioral change remains the key question for 2026. For now, the mood is dark—even if the spending continues.