Jamie Spencer
The latest data from the Conference Board highlights a significant decline in US consumer confidence for December. With Americans expressing growing uncertainty about the economy’s trajectory in the coming year, the numbers paint a picture of apprehension and caution.
A Sharp Decline in Confidence
In December, the Conference Board’s consumer confidence index dropped by 8.1 points to 104.7, falling short of the 113.2 expected by economists surveyed by Bloomberg. This decline marks a notable shift in sentiment, driven by concerns over the economic outlook and potential challenges in the months ahead.
The expectations index, which measures short-term projections for income, business, and labor market conditions, plunged by 12.6 points to 81.1. This represents the largest monthly drop since November 2020 and hovers just above the critical threshold of 80, a level often associated with looming recessions.
Mixed Labor Market Perceptions
While consumer views on current labor market conditions improved, bolstered by strong jobs data and low unemployment rates, their outlook on business conditions took a hit.
Dana Peterson, the Conference Board’s chief economist, noted, “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.”
This pessimism is reflected in the 21.3% of respondents who expect fewer job opportunities in the next six months, a jump from 17.9% in November. Additionally, concerns about declining incomes and worsening business conditions further fueled the downturn in confidence.
Economic Policies and Market Reactions
The potential impact of the Trump administration’s policies continued to weigh on consumers’ minds. Mentions of “politics” and “tariffs” increased, highlighting concerns over their implications. Notably, 46% of respondents anticipated that tariffs would raise the cost of living, while 21% expected tariffs to create more US jobs.
Stock market sentiment also took a hit, with the percentage of consumers expecting higher stock prices in the next year dropping to 52.9%, down from the record high of 57.2% in November. Markets reflected this uncertainty, hitting session lows after the release of the Conference Board’s report before paring some losses.
Fed Policy Adds to Uncertainty
The survey period concluded on December 16, just before the Federal Reserve’s latest meeting. However, the tone of the report aligned with the uncertainty underscored by Fed Chair Jerome Powell. Powell emphasized the challenges posed by inflation and the unpredictable economic environment, using the word “uncertain” more frequently than in any previous press conference in 2024.
“It’s kind of common-sense thinking that when the path is uncertain, you go a little bit slower [cutting interest rates],” Powell explained, comparing the approach to navigating a dark, furniture-filled room or driving on a foggy night. His remarks added to market volatility, further influencing consumer sentiment.
The Road Ahead
The December data highlights a growing disconnect between current economic conditions and future expectations. While job markets remain robust, fears of inflation, policy shifts, and global economic challenges loom large. The Conference Board’s findings suggest that consumer confidence will remain fragile unless clarity emerges on critical economic and policy fronts.
Conclusion: A Cautious Start to 2024
As the new year unfolds, the December dip in consumer confidence serves as a reminder of the economy’s vulnerabilities. Balancing optimism with realistic assessments of the challenges ahead will be essential for policymakers and markets alike. Whether driven by politics, tariffs, or monetary policy, the path forward demands careful navigation and open communication to restore consumer confidence.
