In December, the consumer confidence index demonstrated a notable decline as the expectations outlook fell significantly. This month, the Conference Board reported that consumer confidence dropped 8.1 points to 104.7, well below the consensus estimate of 113.5 as anticipated by Bloomberg. Dana Peterson, Chief Economist at the Conference Board, remarked, "The recent rebound in consumer confidence was not sustained in December.
Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes." The expectations index experienced a more pronounced decline, plummeting 12.6 points to 81.1. This figure hovers just above the critical threshold of 80, which historically signals potential recessionary conditions.
Peterson noted, "Pessimism about future employment prospects returned after cautious optimism prevailed in October and November." Furthermore, the present situation measure saw a slight dip of 1.2 points, ending the month at 140.2, indicating a weakening perception of current business conditions among consumers.
However, there's a silver lining: assessments regarding the labor market continue to improve, reflecting a slow but steady recovery. The decline in consumer confidence this month was primarily driven by respondents over the age of 35, while younger consumers, particularly those under 35, exhibited an increase in confidence levels.
The analysis also revealed that the drop in confidence was concentrated among households earning between $25,000 and $100,000, highlighting potential economic disparities affecting different income brackets. Examining inflation perspectives, average 12-month inflation expectations have 'stabilized' at 5%.
This marks the lowest level for inflation expectations since March 2020. The Conference Board noted a shift in sentiment, revealing that while worries regarding inflation and prices diminished in earlier months, they resurfaced as the dominant concern in December's write-in responses. Additionally, an intriguing aspect of the report included a special question, indicating that about 46% of US consumers foresee that proposed tariffs by President-elect Donald Trump will escalate the cost of living.
Conversely, 21% believe these tariffs could potentially lead to an increase in job opportunities within the United States. This underscores the ongoing debate regarding the impact of tariff policies on both consumers and the broader economy..