Consumer confidence jumped to a five-month high as consumers were more optimistic about inflation and the economic outlook. This optimism was primarily driven by slowing inflation, expectations of lower interest rates, and fading fears of recession.
The Consumer Confidence Index, reported by the Conference Board, rose 9.7 points from 101.0 to 110.7 in December, the highest level since August 2023. The Present Situation Index rose 12.0 points from 136.5 to 148.5, while the Expectation Situation Index increased 8.2 points from 77.4 to 85.6. Historically, an Expectation Index reading below 80 often signals a recession within a year.
Consumers’ assessment of current business conditions improved in December. The share of respondents rating business conditions “good” increased by 3.1 percentage points to 21.7%, while those claiming business conditions as “bad” fell by 2.4 percentage points to 16.5%. Meanwhile, consumers’ assessments of the labor market were also more positive. The share of respondents reporting that jobs were “plentiful” increased by 2.1 percentage points, while those who saw jobs as “hard to get” fell by 2.4 percentage points.
Consumers were more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve rose from 17.2% to 18.7%, while those expecting business conditions to deteriorate fell from 20.1% to 16.0%. Similarly, expectations of employment over the next six months were more favorable. The share of respondents expecting “more jobs” increased by 1.1 percentage points to 17.8%, and those anticipating “fewer jobs” decreased by 2.9 percentage points to 17.2%.
The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home increased to 5.9% in December. Of those, respondents planning to buy a newly constructed home rose to 0.7%, and those planning to buy an existing home climbed to 2.3%.
