Consumer Confidence Drops in December

Following a modest decline in November, consumer confidence continued to decrease in December, driven mainly by weakened consumer expectations.

The Consumer Confidence Index, reported by the Conference Board, fell by 6.1% from 136.4 to 128.1 in December, the lowest level since July 2018. Despite the sharp decline in December, the Consumer Confidence Index remained historically strong. The Present Situation Index decreased slightly from 172.7 to 171.6, while the Expectations Index dropped significantly from 112.3 to 99.1, the lowest level in the past 2 years. The gap between the Present Situation Index and the Expectations Index widened largely in December due to the plunge in the Expectations Index.

Consumers’ assessment of current business conditions was weakened in December. The shares of respondents rating business conditions “good” fell by 4.8 percentage points to 37.2%, while those claiming business conditions “bad” rose by 0.6 percentage point to 11.3%. Meanwhile, consumers’ assessment of the labor market was mixed. Both the share of respondents reporting that jobs were “plentiful” and “hard to get” decreased to 46.2% and 11.6% respectively. The gap between these two shares has widened since 2001.

Consumers’ optimism about short-term future fell in December. The share of respondents expecting business conditions to improve decreased from 21.9% to 18.3%, while those expecting business conditions to deteriorate increased from 8.3% to 9.7%. Similarly, expectations of employment over the next six months were less favorable. The share of respondents expecting “more jobs” steeply decreased by 6.1 percentage points to 16.6% while those anticipating “fewer jobs” rose by 3.2 percentage points to 14.4%. This drop was fueled by consumers’ worry about the job market slowdown.

In 2018, consumer confidence ended at a strong level. Both the Consumer Confidence Index and the Present Situation Index reached to 18-year high levels in October due to the continuing economic expansion and job creation. Meanwhile, consumers are increasingly concerned about the future economic conditions, which further leads to two consecutive declines in the Expectations Index in the last two months of 2018.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home slightly dropped to 6% in December. The share of respondents planning to buy a newly constructed home declined to 0.6% while for those who planning to buy an existing home and were “uncertain” whether to buy a newly constructed or an existing home increased to 3.4% and 2%. Despite some monthly fluctuations, the trend for the share of respondents planning to buy a home within six months has increased since the early 2000s.



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