US consumer sentiment rises to six-month high in early February

By Lucia Mutikani

WASHINGTON, Feb 6 (Reuters) - U.S. consumer sentiment increased to a six-month high in February, though anxiety over the labor market and the rising cost of living because of import-tariff-related inflation remained widespread.

The third straight monthly improvement in sentiment reported by the University of Michigan's Surveys of Consumers on Friday was mostly driven by consumers with the largest stock portfolio holdings, confirming ?a so-called K-shaped economy, where higher-income households are doing well but lower-income consumers are struggling.?

"We may have seen the trough in consumer sentiment as positive ?fundamentals should support attitudes in 2026, as long as the recent stock market selloff doesn't continue," said ?Oren Klachkin, financial markets economist at Nationwide. "That said, we aren't optimistic for a sharp ?rebound in consumer sentiment."?

The ?University of Michigan said its Consumer Sentiment Index increased to 57.3 this month, the highest reading since last August, from a final reading of ?56.4 in January. Economists polled by Reuters had forecast the ?index easing to 55.0. Still, the index remained about 20% below its level in January 2025.

The survey was completed before this week's stock market selloff, driven by investor caution over ?heavy spending by technology firms on artificial intelligence. Stocks ?on Wall Street ?rebounded on Friday. The dollar was steady against a basket of currencies. U.S. Treasury yields rose.

"Sentiment surged for consumers with the largest stock portfolios, while it stagnated and remained at dismal levels ?for consumers without stock holdings," said Joanne Hsu, the director of the Surveys of Consumers. "Concerns about the erosion of personal finances from high prices and elevated risk of job loss continue to be widespread."

Sentiment improved among consumers identifying as Republicans and Democrats, but dipped among Independents. The rise in sentiment was in stark contrast with the Conference Board's Consumer Confidence Index, which plunged in January to the lowest level since May 2014. Both surveys, ?however, underscored ?the growing apathy over the labor market.

The government reported on Thursday that job openings fell to a more than five-year low in December. There were 0.87 job openings for every unemployed person ?compared to 0.89 in November.

Though consumers continued to stress over high prices, they expected inflation to moderate in the next 12 months.

The survey's measure of consumer expectations for inflation over the next year fell to a 13-month low of 3.5% from 4.0% in January. Some economists said this suggested consumers believed the worst of the pass-through from tariffs to prices was behind. But consumers' expectations for inflation over the next five years rose to 3.4% from 3.3% last month.

"The Fed has emphasized medium-term ?expectations and these edged up for the second consecutive month," said John Ryding, chief economic advisor at Brean Capital. "None of this changes the March rate decision for the Fed, however, and to the extent that the outcome of this meeting depends on the data, it will ?come down to the January and February employment reports."?

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci )