The Conference Board's Consumer Confidence Index® pulled back in December. The index decreased to 104.7 this month from November's upwardly revised 112.8. This month's reading was much lower compared to the 112.9 forecasted.
The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, decreased from 141.4 to 140.2 in December. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, decreased from 93.7 to 81.1 in December. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.
“The recent rebound in consumer confidence was not sustained in December as the Index dropped back to the middle of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop. Consumer views of current labor market conditions continued to improve, consistent with recent jobs and unemployment data, but their assessment of business conditions weakened. 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.”
Background on the Consumer Confidence Index
The Conference Board Consumer Confidence Index measures the consumers attitudes and confidence in the economy, business conditions, and labor market, with higher readings indicating higher optimism. The general assumption is that when consumers are more optimistic they will spend more and stimulate economic growth. However, if consumers are pessimistic then spending will decline and the economy may slow down. The index is based on a 5 question survey, with 2 questions related to present conditions and 3 questions related to future expectations. The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977, which is where our data begins.
