Consumer confidence took an unexpected hit in December, with the Conference Board Consumer Confidence Index dropping to 104.7, its lowest level since September. This sudden drop reflects growing unease among consumers about the future, despite continued strength in the labor market.
- The 8.1-point decline caught economists off guard, as they had projected a rise to 113.
Breakdown of the Indexes
- Present Situation Index: Fell slightly, dropping 1.2 points to 140.2, reflecting a marginal decline in how consumers view current business and labor market conditions.
- Expectations Index: Plunged 12.6 points to 81.1, barely above the critical threshold of 80 that often signals an impending recession. This sharp decline underscores heightened pessimism about income, business, and labor market prospects in the months ahead.
Mixed Outlook: The December slump wasn’t felt equally across all groups. The most significant drop was among households earning between $25,000 and $100,000 annually. By contrast, consumers at the lower and upper ends of the income spectrum reported only modest changes in their outlook.
- The decline was driven by consumers over 35 years old, while confidence among those under 35 actually improved.
What They’re Saying: Dana M. Peterson, Chief Economist at The Conference Board, pointed to rising worries about the future as the primary driver of the downturn. “While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop,” Peterson said.
- However, she noted that views of current labor market conditions remained positive, even as optimism about future employment prospects faded after a brief upswing in October and November.
Bottom Line: December’s report stands in contrast to the more optimistic consumer outlook reflected in the New York Fed’s report earlier this month, which had shown signs of improving sentiment about the future. The divergence highlights the uncertainty surrounding economic conditions as the year closes.
