Consumer confidence softened in December, according to new data from The Conference Board. Specifically, the headline sentiment index fell from 136.4 to 128.1 this month, a larger decrease than anticipated and the lowest headline reading since July. Most of the weakness in December was concentrated in Americans’ outlook for economic conditions six months from now, including sharp declines in expectations for greater employment opportunities and reported plans to purchase big-ticket durables, e.g. washing machines and cars. December’s selloff in the stock market has likely exacerbated the latest pullback in optimism. This is evidenced by the unusually large drops in confidence reported by both higher income and older respondents last month, two groups that typically have a greater exposure to equities.
Moreover, the headline confidence gauge climbed to the highest level since 2000 shortly after the S&P 500 index peaked in September and has since drifted lower with the overall market. Consumers’ general assessment of current economic conditions, though, remains very encouraging, with the present situation index ending this month just fractionally below an 18-year high. Further, the gap between the percentage of surveyed Americans saying that they believe jobs are “plentiful” and those saying jobs are “hard to get” rose in December to the best reading in almost two decades. One interpretation of all of this is that even though optimism about the future has retreated from extreme levels, Americans’ opinion of the current economic climate is still about as good as it has ever been. This is supported by the record-breaking holiday sales reported by Amazon this week, which shows that any recent changes in sentiment have yet to markedly hurt consumers’ willingness to spend.
Sources: Econoday, The Conference Board, ZH, Bloomberg
Post author: Charles Couch