By Nathalie Voit
Consumer confidence continued its upward trend in December, according to the Conference Board Dec. 22 press release.
The Consumer Confidence Index rose to 115.8 in December, up from an upwardly revised 111.9 in November, the New York-based organization said. The Present Situation Index, which captures consumer sentiment about the current economic climate, remained relatively stagnant at 144.1, down from 144.4 last month. The Expectations Index, a forward-looking indicator of consumers’ short-term economic prospects, jumped to 96.9 from 90.2.
“Consumer confidence improved further in December, following a very modest gain in November,” said Senior Director of Economic Indicators at The Conference Board Lynn Franco. “The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.”
According to Franco, declining concerns about inflation and COVID-19 in December helped drive the improvement. However, confidence and consumer spending are likely to face challenges from sustained price increases and a winter Omicron surge heading into the new year.
Consumer sentiment also improved in December, driven by optimism among households at the bottom end of the income ladder, the University of Michigan reported Dec. 23.
The index of consumer sentiment rose to 70.6, up from 67.4 in November. The current economic conditions index also improved from last month, rising to 74.2 from 73.6. However, the study found that the index of consumer expectations posted the greatest month-over-month change, jumping 7.6% to 68.3 in December.
“The uptick was primarily due to significant gains among households with incomes in the bottom third of the distribution,” Surveys of Consumers Chief Economist Richard Curtin said. “Indeed, the bottom third expected their incomes to rise during the year ahead by 2.8%, up from 1.8% last December, and the highest level since 2.9% was recorded in 1999.”
“There have only been five times in the past half-century that income expectations among low-income households” have surpassed December’s levels, Curtis added.
The gains were led by news about a 5.9% Social Security cost-of-living adjustment in 2022, in addition to expected wage increases of 5.0% for young and low-income workers, the Michigan survey found.
Unfortunately, December’s positive results are likely to be undermined in January, “following the rapid spread of the Omicron variant in the U.S.,” Curtis said.
Still, the data is too scarce to predict the full-scale impact of Omicron on the economy, he added.
The twin readings point to the resilience of the American consumer, who remain relatively optimistic about the state of the economy despite persistent inflation and a seemingly
never-ending pandemic.
Next month’s economic data, which will factor in the post-holiday Omicron surge, will reveal whether those sentiments hold up.
