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Economy in Brief

U.S. Consumer Confidence Down Slightly, but Prior Month Revised Upward
by Carol Stone, CBE  December 31, 2019

The Conference Board's Consumer Confidence Index eased slightly in December, by 0.2% to 126.5 (1985=100), but November was revised upward to 126.8 from its originally reported 125.5. A December index level of 128.3 had been expected in the Action Economics Forecast Survey. Across all of 2019, the level of confidence was basically unchanged, just edging down 0.1% from December 2018. During the last 20 years, there has been 70% correlation between the level of confidence and the y/y change in real consumer spending.

The decrease in confidence in December encompassed a 2.0% increase in the present situation reading accompanied by a 2.9% decline in expectations. The present situation index of 170.0 was 0.1% above December 2018, while the expectations index was 97.4, down 0.3% from the year ago.

Within the present situation assessment, the share of respondents believing business conditions are good was 38.7%, down marginally from a revised 38.8% in November (originally reported at 40.2%). Jobs are seen as plentiful by 47.0% of respondents, up from 44.0% in November, while 13.1% believe jobs are hard to get, up modestly from 12.4% in November.

There was little change in the expectations for conditions six months from now. Overall business conditions are expected to be the "same" by 71.8% of respondents in December versus 70.0% the previous month; just 9.3% expect business conditions to worsen. Similarly, 69.8% look for the overall employment situation to remain the "same" versus 70.1% in November. And 71.2% believe incomes will be the "same," following 70.9% in November.

Respondents in the December survey estimate that inflation will be 4.4% over the next 12 months, down minimally from 4.5% in November. The share expecting higher interest rates did increase to 45.3% from 42.9%; those looking for lower rates decreased to 17% from 21.0%. The share expecting stock prices to rise declined to 37.7% from November's 39.8%, but these two months are up noticeably from 31.9% and 31.8% in September and October, respectively. The portion currently expecting a stock market correction did increase in the December data to 29% from 26.3% in November, but these are the smallest since July's 22.3%.

The number of participants planning to buy a house during the next six months is 6.0% in December, up from November's relative low of 4.7%, which was indeed the lowest since mid-2015. Major appliance purchases are planned by 48.6% in December, down from 49.3% the prior month and the fifth consecutive monthly decrease in that portion; this reading frequently swings up and down, so even though the share isn't small, it does seem to be forming a downtrend.

The confidence reading amongst survey respondents under age 35 had weakened 8.1% in November (revised from -10.9%), but it rebounded by 8.2% in this latest survey (-0.6% y/y). Confidence amongst respondents aged 35-54 increased 0.9% (-7.8% y/y), evidently stabilizing after three declines in four months. Confidence amongst respondents over age 55 fell 3.1% (+8.1% y/y) after November's 8.3% increase.

The Consumer Confidence data are available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA.

Conference Board (SA, 1985=100) Dec Nov Oct Dec Y/Y % 2018 2017 2016
Consumer Confidence Index 126.5 126.8 126.1 -0.1 130.1 120.5 99.8
   Present Situation 170.0 166.6 173.5 0.1 164.8 144.8 120.3
   Expectations 97.4 100.3 94.5 -0.3 107.0 104.3 86.1
Consumer Confidence By Age Group
   Under 35 Years 128.7 118.9 129.4 -0.6 133.7 130.2 122.4
   Aged 35-54 Years 125.3 124.2 130.7 -7.8 132.2 123.5 106.2
   Over 55 Years 126.7 130.8 120.8 8.1 126.3 112.9 84.6
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