The group’s headline consumer confidence index fell 8.1 points to 104.7 in December, erasing gains made in November, with the decline most concentrated in middle-income households.
The present situation index, which assesses consumers’ views on a mix of current business and labor conditions, edged down slightly to 140.2. The decline was driven mostly by a deterioration in appraisals of the current business situation in the United States, with 16.7 percent saying business conditions were “bad,” up from 15.3 percent who expressed that view in November.
Labor market optimism, a key driver of consumer spending, showed mixed signals. There was improvement in assessments of current labor market conditions, but deterioration in the six-month-ahead outlook.
The Conference Board’s forward-looking expectations index, which reflects the business, income, and labor market outlook over the next six months, plunged 12.6 points to 81.1 in December, hovering just above the 80-point threshold that often signals an incoming recession. The decline marked the largest drop in over four years.
“While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop,“ Dana Peterson, chief economist at The Conference Board, said in a statement. ”Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes. Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November.”
Fewer respondents expected business conditions to improve over the next six months, while concerns about worsening labor market conditions grew. The share of consumers expecting business conditions to improve fell to 21.7 percent from 24.7 percent in November, while those anticipating worsening conditions rose to 18.3 percent from 15.9 percent.
Similarly, optimism about the labor market declined, with 19.1 percent expecting more jobs (down from 22.8 percent) and 21.3 percent predicting fewer jobs (up from 17.9 percent). Income outlooks also worsened, as only 17.2 percent expected higher incomes (down from 20.7 percent), while 14.3 percent anticipated income decreases (up from 12.1 percent).
Average 12-month inflation expectations stabilized at 5 percent, the lowest since March 2020, though inflationary concerns remained, per the report.
“References to inflation and prices dominated write-in responses,” the report states. “Asked what goods and services they expect to be more affordable in 2025, consumers mostly selected food and gas. Costs for gyms and live events, concerts, and sports were considered the least likely to be more affordable next year.”
The pullback in consumer confidence occurred after a surge in optimism in the immediate wake of the November election that was possibly related to expectations that the promised policies of the incoming Trump administration would lead to lower prices of essentials like fuel and groceries.
