United States: Consumer confidence slips in December
December 27, 2017
The Conference Board’s monthly consumer confidence index fell to 122.1 in December, down from a revised 128.6 (previously reported: 129.5) in the previous month. Following the 17-year high in November, December’s reading came considerably below market expectations of a more moderate dip to 128.1. Nevertheless, the index remains comfortably above the 100-point threshold that separates consumer optimism from pessimism.
The deterioration of confidence was largely due to a less optimistic outlook for business and job prospects in the near term. The percentage of consumers expecting business conditions to improve over the next six months decreased by 2.9 percentage points from the previous month, to 18.4% in December, whereas the fraction expecting conditions to worsen jumped by 2.5 percentage points to 9.2%. Regarding their income prospects in the coming months, whereas the percentage of consumers anticipating an improvement rose by 2.0 percentage points to 22.3%, the proportion expecting a contraction also went up, from 7.6% to 8.9%.
In addition, consumers’ view on the short-term outlook for the job market were less upbeat in December compared to the previous month. The percentage of consumers expecting an increase in available jobs in the coming months eased from 21.3% in November to 18.4% in December, while those anticipating fewer jobs rose from 12.1% to 16.3%. Meanwhile, the labor differential—the difference between the percentage of respondents who state that jobs are plentiful and those who say that jobs are hard to get—increased marginally to 20.5 from 20.2 in November and 19.6 in October.
Whereas the short-term outlook deteriorated, consumers’ view of current conditions improved marginally in December. The percentage of consumers saying that business conditions are “good” came at 35.2%, 0.2 percentage points up from the previous month. In a similar trend, those claiming business conditions are “bad” fell 0.2 percentage point to 12.1% in December.
The last reading of the year confirms that, despite a drop, consumer optimism continued to be strong in December, marking the strongest month of December since 2000. Consumers’ expectations remained robust and above average historical levels, indicating that household spending growth should continue on a healthy trajectory in 2018.
Author: Almanas Stanapedis, Economist