Consumer Confidence is Improving, Boding Well for the Economy

According to data issued Wednesday by the Conference Board, consumer confidence in the US economy increased in December as high inflation continued to reduce.

The newest consumer confidence index from the business think tank showed 108.3 this month, a considerable increase from the previously corrected figure of 101.4 in November. According to Refinitiv consensus estimates, economists expected the index to be 101.

It is the index’s highest reading since April 2022.

“The Present Situation and Expectations Indexes increased due to consumers’ more optimistic opinion of the economy and jobs,” said Lynn Franco, senior director of economic indicators at the Conference Board. “Inflation forecasts fell to its lowest level since September 2021 in December, with recent drops in gas prices providing a major push.”

According to AAA, the national average price of ordinary gasoline fell to $3.11 per gallon on Wednesday. Prices for gasoline haven’t been this low since July 2021.

“You’d have to be living under a rock not to notice that gasoline prices at the pump have dropped about two dollars from the $5 high in June of this year,” said Christopher S. Rupkey, chief economist for FwdBonds. “The consumer was more concerned about increased prices than they were about finding a new higher-paying job, but they are becoming more confident as price pressures ease.”

According to the Conference Board, while consumers’ intentions to spend money on trips increased, their intentions to buy homes and large-ticket appliances decreased.

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According to National Association of Realtors data issued Wednesday, US house sales fell for the tenth straight month in November, down 7.7% from October. Home sales are at their lowest point since May 2020, when the epidemic brought the real estate market – and everything else – to a halt.

Consumer confidence, as assessed by this and other surveys such as the University of Michigan’s consumer mood index, has largely been declining throughout 2022 as the country dealt with the greatest rates of inflation in four decades.

The headline consumer confidence index averaged 128.5 points in 2019.

Despite the economic difficulties, consumers remained surprisingly resilient. They continued to spend for much of the year, thanks partly to a healthy labor market, greater levels of savings, and plenty of pent-up demand from the pandemic.

Those purchasing tendencies, though, appear to be slowing. And also, according to Commerce Department figures released last week, retail sales in the United States decreased substantially in November.

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