With inflation cooling and gasoline prices falling, the U.S. consumer confidence index rebounded more than expected in December, rising to a new high since April this year. However, consumers’ concerns about the economic recession continued, resulting in fewer households planning to spend a lot in the next six months.
The latest data released by the Conference Board on Wednesday (22nd) showed that the U.S. consumer confidence index rose to 108.3 in December, much higher than the expected 101 and the revised previous value of 101.4. The flash index of consumer confidence from the college survey was similar for December.
In the market’s much-anticipated inflation expectations, consumers’ inflation expectations for the next 12 months fell to 6.7 percent from 7.1 percent in November, the lowest level since September 2021. The growth rate of the consumer price index (CPI) slowed down in November recently. In addition, the pullback in short-term inflation expectations also means that while inflation is still at uncomfortably high levels, it peaked a few months ago.
Among other indicators, the current situation index of consumers’ assessment of current business and labor market conditions rose to 147.2 from 138.3 in the previous month; the expectation index for the short-term outlook for income, business and labor market conditions rose to 82.4 from 76.7. The U.S. Economic Council said that the expectation index remained at around 80, which is related to the recession.
Therefore, consumers’ willingness to buy high-priced goods will decrease in the next six months, but the proportion of consumers who plan to buy cars has not changed much, while the willingness to buy home appliances has hit a new low since July. This is also the result of rising borrowing costs. It is purchased with a loan. The US Federal Reserve (Fed) has raised the benchmark interest rate to a range of 4.25% to 4.50% this year, a new high since the end of 2007.
Wells Fargo senior economist Sam Bullard said consumers may be more confident than they were in the summer months, though they are still more cautious than they were in 2021. The outlook for consumer confidence next year will depend on whether the Fed can achieve a soft landing on the economy’s so-called narrow runway.
Lynn Franco, director of the Center for Economic Indicators at the U.S. Economic Review Council, said that inflation expectations for the coming year have fallen to their lowest levels since September 2021, driven by the recent drop in gasoline prices.
