Consumer confidence continued to improve in December as inflation concerns eased after hitting a 13-year high last month. Spending intentions for homes, cars, and major appliances all increased. However, consumer spending will continue to face headwinds from higher prices, Omicron surge and reduced fiscal stimulus in 2022.
The Consumer Confidence Index, reported by the Conference Board, rose 3.9 points from 111.9 to 115.8 in December, the highest level since July. The Present Situation Index slightly decreased 0.3 points from 144.4 to 144.1, and the Expectation Situation Index increased 6.7 points from 90.2 to 96.9.
Consumers’ assessment of current business conditions improved in December. The shares of respondents rating business conditions “good” rose by 2.0 percentage points to 19.9%, while those claiming business conditions “bad” fell by 0.5 percentage points to 26.8%. Meanwhile, consumers’ assessment of the labor market was less favorable. The share of respondents reporting that jobs were “plentiful” decreased by 0.4 percentage points, while those saw jobs as “hard to get” rose by 1.7 percentage points.
Consumers were more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve increased from 25.6% to 26.7%, while those expecting business conditions to deteriorate declined from 19.6% to 17.9%. Similarly, expectations of employment over the next six months were more favorable. The share of respondents expecting “more jobs” rose by 2.3 percentage points to 25.1%, while those anticipating “fewer jobs” fell by 4.2 percentage points to 14.8%.
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 climbed to 7.5% in December thanks to low mortgage rates. The share of respondents planning to buy a newly constructed home and for those who planning to buy an existing home rose to 0.9% and 2.7%. However, surging home prices and lack of inventory could further harm affordability and hinder ownership opportunities.