Consumer Confidence hits a three-year high
Consumer Confidence climbed to its highest reading in more than three years, the Conference Board reported this morning.
The latest Consumer Confidence Index increased to 114.8 from a revised reading of 108.0 in December 2023. The board said this is the highest reading since December 2021.
The Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions, jumped to 161.3 compared to 147.2 in the prior month.
While not rising as dramatically, the Expectations Index also moved ahead to a reading of 83.8 in comparison to a December 2023 revised reading of 81.9.
“January’s increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead, and generally favorable employment conditions as companies continue to hoard labor,” said Dana Peterson, chief economist at the Conference Board. “The gain was seen across all age groups, but largest for consumers 55 and over. Likewise, confidence improved for all incomes groups except the very top; only households earning $125,000+ saw a slight dip.”
Peterson also noted that January’s write-in responses revealed that consumers remain concerned about rising prices although inflation expectations fell to a three-year low.
“Buying plans dipped in January, but consumers continued to rate their income and personal finances favorably currently and over the next six months,” the economist said. “Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months continued to gradually ease in January, consistent with an Expectations Index rising above 80.”
Other findings in the latest Consumer Confidence Index include:
- Consumer expectations for the next six months increased slightly in January, due to receding pessimism around future business conditions, labor market, and income prospects.
- Expectations that interest rates will rise in the year ahead plummeted to just 41.5%.
- Consumers expecting stock prices to be higher in the year ahead retreated slightly after surging in December but remained near three-year highs.
- Average 12-month inflation expectations fell to 5.2%, the lowest since March 2020 (4.5%). Consumers’ views of their expected family financial situation were slightly more tempered in January but remained on net optimistic.
- On a month-to-month and six-month basis, buying plans for autos, homes, and big-ticket appliances declined slightly for all three categories.
