December 2025 U.S. Consumer Sentiment Slight Improvement Amid Persistent Year-Over-Year Declines

The December 2025 preliminary consumer sentiment index from the University of Michigan, reported by the Wall Street Journal [1], showed a slight monthly improvement to 53.3, up from November’s revised final reading of 51. However, this level remains significantly below the 2025 January reading of 71.1 and the index’s historical benchmark of 100 [0]. Year-ahead inflation expectations declined to 4.1%—the lowest since January 2025—from November’s 4.5%, suggesting a modest easing of inflation concerns among consumers [0]. A prior November government shutdown is noted as a potential factor that may have depressed sentiment in earlier months, while younger consumers were identified as the primary drivers of December’s uptick [0].

In the equity markets, the reaction was muted on December 5, 2025: the S&P 500 closed up 0.15%, the Dow Jones Industrial Average rose 0.21%, and the NASDAQ ended flat [0]. This muted response likely stems from investors weighing the slight monthly improvement against the index’s persistent year-over-year weakness, which indicates ongoing economic pessimism among consumers.

1. Lingering Economic Anxiety Despite Improvement
   : The marginal rise in sentiment does not offset the significant year-over-year decline, highlighting continued consumer concern about economic conditions. The index’s distance from its historical benchmark of 100 underscores this sustained pessimism [0].
2. Inflation Expectations Ease But Remain Elevated
   : While year-ahead inflation expectations fell to the lowest 2025 level, they still remain above the Federal Reserve’s 2% target, which could influence the Fed’s future monetary policy decisions [0].
3. Muted Market Reaction Reflects Cautious Sentiment
   : The minimal movement in major U.S. indices suggests investors are not yet confident that December’s slight improvement signals a broader economic recovery, indicating ongoing market caution [0].

• Risks
  : The sentiment index’s persistent low level (well below January 2025 and historical benchmarks) could lead to reduced consumer spending, which accounts for approximately 70% of U.S. GDP, potentially slowing economic growth [0]. Additionally, inflation expectations above the Fed’s target may delay anticipated rate cuts, further weighing on market and consumer sentiment.
• Opportunities
  : If sentiment continues to improve and inflation expectations decline further toward the Fed’s target, it could support increased consumer spending, stabilize economic growth, and boost market confidence in the medium term.

The December 2025 University of Michigan consumer sentiment index shows a slight monthly improvement but remains sharply lower year-over-year. Key data points include: January 2025 sentiment (71.1), November 2025 revised sentiment (51), December 2025 preliminary sentiment (53.3), November inflation expectations (4.5%), and December inflation expectations (4.1%) [0]. U.S. stock indices reacted muted to the news. This analysis provides contextual information for decision-making, focusing on consumer sentiment trends, inflation expectations, market reactions, and associated economic risks and opportunities.