The US Cost of Living Index
The Cost of Living has Stabilized - Trust and Confidence Have Not
February 6, 2026
The most important development in cost-of-living sentiment is not recovery, but stabilization. The latest reading (Jan 21–Feb 4) shows the level at which that stabilization has occurred.
After a highly volatile first half of 2025, US cost-of-living sentiment has returned to roughly its early-2025 level. The latest reading of –8 places households close to where they stood in January, prior to a year of policy uncertainty, political disruption, and sharp swings in economic messaging. In that sense, the inflation shock has eased into something more static.
For policymakers, stabilization matters. It creates a platform: a calmer backdrop against which confidence could, in theory, be rebuilt. However, the data also points to a critical constraint. While cost-of-living pressure has stabilized, most households continue to occupy a range spanning financial discomfort to outright distress, and confidence in the administration’s ability to materially improve household finances remains weak. The disruption and volatility of the first year has left a residue of skepticism. As a result, stabilization should not be interpreted as a sign of consumer optimism.
This lack of confidence has important behavioral consequences. Rather than encouraging spending or risk-taking, stabilization is laced with caution. Even households that report having slightly more financial headroom remain defensive. Extra cash is more likely to be saved, used to pay down debt, or held back as a buffer against future shocks than deployed into discretionary consumption — a warning sign for policymakers and investors who assume wallets will open if interest rates are lowered or tariff-related payments reach households.
Conversation continues to be dominated by fixed costs — housing, utilities, insurance, healthcare, and debt servicing — which reinforce this mindset. These expenses anchor perceptions of affordability and limit the psychological impact of modest improvements elsewhere. Wages are widely seen as lagging behind this cost structure, leaving households feeling exposed despite the absence of new inflation spikes.
The result is heightened sensitivity. With trust low, even small changes in prices, interest-rate expectations, or labor-market conditions generate outsized reactions. Stability has reduced panic, but it has not restored resilience. The consumer backdrop is therefore calmer than it was in mid-2025, but also more brittle than headline data might suggest.
From an investment perspective, this combination matters. Stabilization reduces downside tail risk associated with accelerating cost pressure, but it does not yet support a stronger demand outlook. Consumption remains constrained, confidence fragile and behavior skewed toward caution. Until households trust that conditions can genuinely improve, sentiment — and the conversations that drive it — are unlikely to change.
The key takeaway is that the cost of living has stabilized and is back to roughly where it stood when the current administration took office. That gives policymakers something to build on. But without a corresponding recovery in trust and confidence, stabilization alone is unlikely to translate into a meaningful shift in consumer behavior. For now, the dominant feature of the household economy is not crisis, but normalized stress and persistent caution.
About The Cost of Living Index
Most economic data captures outcomes after the fact and often fails to reflect how conditions are actually experienced. Our work instead tracks how Americans talk about the cost of living, job security and financial pressure in real time. This human-read data trains a proprietary language model that highlights early shifts in confidence and behavior at scale, before they appear in polling or government data — if at all — with clear implications for voting preferences and turnout in the 2026 midterms.