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Economy in Brief

U.S. Consumer Confidence Recovers During January
by Tom Moeller  January 26, 2021

• Consumer confidence rebounds following two months of decline.

• Expectations improve while the current conditions reading continues to fall.

• Jobs gap deterioration suggests higher unemployment rate.

The Conference Board Consumer Confidence Index increased 2.5% (-31.5% y/y) to 89.3 during January after falling to 87.1 in December, revised from 88.6. A reading of 89.2 had been expected in the Action Economics Forecast Survey.

The Consumer Expectations reading rose 6.3% (-8.8% y/y) this month to 92.5 after increasing 3.2% in December. Meanwhile, the Present Situation index fell 3.2% (-51.5% y/y) to the lowest level since May.

The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, declined to -3.2% from -1.9%, suggesting the unemployment rate may rise in January. This series has an 80% correlation with the unemployment rate over the last ten years. The decline in the labor market differential occurred as the jobs plentiful measure fell and the jobs hard to get index rose.

Business conditions were perceived as good m/m by a fairly steady 15.8% of respondents. That was down from 40.0% in January of last year. Expectations that business conditions would improve in six months rose to 33.7%, up from November's low of 26.5%. More jobs were expected in six months by a higher 31.3% of respondents, up from 25.0% in November. Alternatively, to the downside was the percentage expecting income to increase to 14.4%, a reading only slightly higher than the recent low of 13.0% reached in August.

The expected inflation rate in twelve months fell slightly to 5.8% after increasing to 6.0% in December. That was increased from the 4.4% low twelve months ago. The share of respondents planning to buy a new home rose to 1.2% in January, the highest number in three months. Those planning on buying a major appliance held fairly steady m/m at 48.4%, up from the low of 43.3% in October.

Confidence fell for individuals both under 35 and for the 35-to-54 age group. Confidence increased slightly for those over 55 years old.

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) Jan Dec Nov Jan '20 2020 2019 2018
Consumer Confidence Index 89.3 87.1 92.9 130.4 101.0 128.3 130.1
   Present Situation 84.4 87.2 105.9 173.9 109.8 169.8 164.8
   Expectations 92.5 87.0 84.3 101.4 95.2 100.6 107.0
Jobs Gap (%) -3.2 -1.9 6.9 35.3 6.8 33.1 27.6
   Jobs Plentiful (%) 20.6 21.0 26.3 47.2 27.8 45.8 42.0
   Jobs Hard to Get (%) 23.8 22.9 19.4 11.9 21.0 12.6 14.4
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