Consumer Confidence Rebounds in December

Measures of consumer confidence improved in December reversing course from the recent decline. The Conference Board reported that the Consumer Confidence Index increased by 6.1 points on a month-over-month seasonally adjusted basis in December to 78.1. Meanwhile, according to Thomson Reuters and the University of Michigan, the Consumer Sentiment Index rose by 7.4 points in December.

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In addition to current economic conditions, the Conference Board surveys consumers’ future expectations. Consumers are asked whether they expect economic conditions in 6 months to improve, worsen, or stay the same.

Consumes’ expectations for business conditions improved in December. The respondents expecting business conditions to improve increased by 0.5 percentage points while the respondents expecting business conditions to worsen decreased by 2.1 percentage points.

Consumers’ expectations for the labor market were considerably more optimistic in December.  The respondents expecting labor market conditions to improve increased by 4 percentage points while the respondents expecting labor market conditions to worsen decreased by 2.4 percentage points.

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According to the Conference Board, the share of consumers planning to buy a home in the next 6 months was 5.8% on a seasonally adjusted 3-month moving average basis. Over this same period, the share of respondents planning to purchase a “lived-in” home decreased slightly to 3.0%. The share of respondents planning to purchase a new home increased to 1.0%.

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The December rebound in measures of consumer confidence was a welcome result. The recovery appears to be back on track; however, questions still remain about the strength of the labor market and the effect on mortgage interest rates from the recent decision of the Federal Open Market Committee (FOMC) to wind down its asset purchase program. These questions will be answered in 2014.



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