Consumer Confidence Dips for 2nd Straight Month
The Conference Board, New York, said its Consumer Confidence Index declined in December, the second straight monthly decline economic uncertainty following a resurgence in the coronavirus pandemic.
The Index now stands at 88.6, down from 92.9 in November. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased sharply from 105.9 to 90.3. However, the Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – increased from 84.3 in November to 87.5 this month.
“Consumers’ assessment of current conditions deteriorated sharply in December, as the resurgence of COVID-19 remains a drag on confidence,” said Lynn Franco, Senior Director of Economic Indicators with The Conference Board. “As a result, consumers’ vacation intentions, which had notably improved in October, have retreated.”
On the flip side, Franco noted, as consumers continue to hunker down at home, intentions to purchase appliances have risen. “Overall, it appears that growth has weakened further in Q4, and consumers do not foresee the economy gaining any significant momentum in early 2021,” she said.
Sam Bullard, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said the drop in confidence largely reflected a weak labor market. “However, encouraging news on vaccine releases should go a long way to boosting spirits in the months ahead,” he said. “As vaccines get widely distributed in the months ahead, we expect consumer confidence will improve materially.”
The report said consumers’ assessment of current conditions declined in December. The percentage of consumers claiming business conditions are “good” decreased from 18.8 percent to 16.0 percent, while those claiming business conditions are “bad” increased from 34.9 percent to 39.5 percent. Consumers’ assessment of the labor market was also less favorable. The percentage of consumers saying jobs are “plentiful” declined from 26.3 percent to 21.8 percent, while those claiming jobs are “hard to get” rose from 19.4 percent to 22.0 percent.
Consumers, however, were moderately more optimistic about the short-term outlook. The percentage of consumers expecting business conditions will improve over the next six months increased from 26.5 percent to 29.0 percent, while those expecting business conditions will worsen decreased from 22.5 percent to 21.9 percent. Consumers’ outlook regarding the job market also improved. The proportion expecting more jobs in the months ahead increased from 25.0 percent to 27.5 percent, however those anticipating fewer jobs increased marginally from 21.6 percent to 22.2 percent. Regarding their short-term income prospects, the percentage of consumers expecting an increase rose marginally from 16.0 percent to 16.8 percent, while the proportion expecting a decrease declined marginally from 14.5 percent to 14.3 percent.