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Economy in Brief

U.S. Consumer Confidence Drops in December
by Gerald D. Cohen  December 22, 2020

• Conference Board measure of consumer confidence falls for second consecutive month; lowest since August.

• Current conditions index plummets while expectations rise.

• Jobs gap suggests flat-to-up unemployment rate in December.

The Conference Board Consumer Confidence Index fell a great-than-expected 4.6% to 88.6 in December (-30.9% year-on-year), from a downwardly revised 92.9 in November (was 96.1). This is the second consecutive decline, the lowest reading since August, and was well below the Action Economics Forecast Survey forecast of 97.5.

Consumer views of the current situation and expectations dropped in December, with the present situation down 14.7% to 90.3 (-47.0% y/y). Meanwhile, expectations increased 3.8% to 87.5 (-12.5% y/y). This is the reverse of November, when expectations fell and current conditions were relatively steady. The jobs gap, representing the difference between respondents indicating 'jobs are plentiful' and those saying 'jobs are hard to get', declined to -0.2% from +6.9% suggesting the unemployment rate will hold steady or potentially rise in December. This series has an 80% correlation with the unemployment rate over the last ten years (see chart in lower left hand corner). The decline in the labor market differential was the result of both a decrease in the 'jobs plentiful' measure and a rise in the 'jobs hard to get' index.

Interestingly, despite generally soft inflation readings – headline CPI inflation was just 1.2% y/y in November – the expected inflation rate in twelve months rose to 5.9% from 5.7%, the fastest since July. Perhaps this is the result of rising energy prices (for more see today's commentary on energy prices). The share of respondents planning on buying a new home in six-months slid to 5.2% in December the lowest since November 2019. Meanwhile, those planning on buying a major appliance rose to 47.7% from 32.0%.

Confidence fell for both those under 35 and over 55, while it rose for the 35-to-54 age group.

The Consumer Confidence data are available in Haver's CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and the market expectations are in AS1REPNA.

Conference Board (SA, 1985=100) Dec Nov Oct Dec '19 2019 2018 2017
Consumer Confidence Index 88.6 92.9 101.4 128.2 128.3 130.1 120.5
   Present Situation 90.3 105.9 106.2 170.5 169.8 164.8 144.8
   Expectations 87.5 84.3 98.2 100.0 100.6 107.0 104.3
Jobs Gap (%) -0.2 6.9 7.1 33.5 33.2 27.6 14.0
   Jobs Plentiful (%) 21.8 26.3 26.7 46.5 45.8 42.0 32.4
   Jobs Hard to Get (%) 22.0 19.4 19.6 13.0 12.6 14.4 18.4
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