A strong job market and a sturdy business climate have left Americans feeling quite jolly this December.
US consumer confidence improved for the third consecutive month, leaping to its highest level since July, while recession worries abated, according to new data released Wednesday by the Conference Board.
The business group’s Consumer Confidence Index — a leading economic indicator of households’ future spending and saving patterns — jumped to a reading of 110.7 this month from a downwardly revised 101 in November.
Additionally, consumers’ “perceived likelihood of a US recession” during the next 12 months fell to its lowest level seen all year, according to the report.
December’s preliminary reading far exceeded economists’ expectations of 104.5, according to FactSet consensus estimates.
“December’s increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market, and personal income prospects over the next six months,” Dana Peterson, chief economist at The Conference Board, said in a statement.
Brighter future
The December headline index was buoyed by an improvement in consumers’ outlooks for six months from now — particularly for their job prospects, overall business conditions and their incomes.
The Conference Board’s Expectations Index shot up to 85.6 from a downwardly revised reading of 77.4 in November.
In assessing the future, consumers were more confident that interest rates wouldn’t rise as much, that the stock market would remain strong and that their financial picture would improve.
Last week, the Federal Reserve held interest rates steady for the third consecutive time and signaled that rate cuts may come in 2024. The cut-off date for the Conference Board survey was December 14, a day after the Fed announcement.
As such, more people said they planned to buy big-ticket items such as cars and appliances and go on vacation. In fact, 55.8% of respondents said they intended to go on vacation in the next six months. That’s the highest share since late 2019, Conference Board historical data shows.
The Present Situations Index also rose, climbing to 148.5 from 136.5. That index is at its highest level since March.
“There are plenty of ingredients that go into the recipe for rising confidence, but three of the big ones are the unemployment rate, the price for a gallon of gasoline and the stock market,” Wells Fargo economists wrote in a note issued Wednesday. “All three moved in the right direction of late.”
Inflation concerns, some uncertainty ahead
When the Expectations Index is below 80, that has typically signaled a recession within the next year, according to the Conference Board.
Although recession fears dropped to their lowest level of the year, two-thirds of survey respondents said they think a downturn is still possible next year, according to the report.
And while inflation has cooled significantly during the past 18 months, elevated prices continue to weigh heavily on households.
Rising prices topped the write-in list of concerns, while politics, interest rates and global conflicts saw downshifts, Peterson noted in the report.
“When asked to assess their current family financial conditions (a measure not included in calculating the Present Situation Index), the proportion reporting ‘good’ ticked down while those saying ‘bad’ rose slightly,” Peterson said. “This suggests consumers’ view of their current finances may paint a more tempered picture than the perception that overall conditions are better than a month ago.”
