Consumer confidence falls in January amid concerns over interest rates, inflation
Consumer confidence retreated for a second consecutive month in January, falling to a four-month low as consumers grew less optimistic about about both present and future business conditions and the labor market.
In preliminary results, the Conference Board’s Consumer Confidence Index declined 5.4 points in January to 104.1 from a revised reading of 109.5. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell sharply in January, dropping 9.7 points to 134.3.
The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — fell 2.6 points to 83.9, but remained above the threshold of 80 that usually signals a recession ahead. The cutoff date for preliminary results was January 20, 2025.
“All five components of the Index deteriorated but consumers’ assessments of the present situation experienced the largest decline,” said Dana M. Peterson, chief economist at The Conference Board.
Notably, views of current labor market conditions fell for the first time since September, while assessments of business conditions weakened for the second month in a row.
"Consumers were also less optimistic about future business conditions and, to a lesser extent, income," Peterson added. “The return of pessimism about future employment prospects seen in December was confirmed in January.”
Inflation & Interest Rates
Average 12-month inflation expectations increased from 5.1% to 5.3% in January, likely reflecting stickier inflation in recent months. More than half (51.4%) of consumers now expect higher interest rates over the next 12 months. The share expecting lower rates dropped from 28.5% last month to 23.9% in January.
"This is consistent with recent signaling by the Fed that the pace of interest rate cuts may slow in 2025, as well as ongoing increases in mortgage rates,” Peterson said.
Purchasing Plans
On a six-month moving average basis, purchasing plans for homes and cars were flat in January. More consumers planned to buy big-ticket items over the next six months than not, but that share was down slightly. Consumer buying plans were flat for most appliances and still down for electronics on a six-month moving average basis.
Separately, consumers continued to express intentions to purchase additional services in the months ahead, especially dining out and streaming.
Findings from the January report are below.
Present Situation
Consumers’ assessments of current business conditions deteriorated in January.
• 18.4% of consumers said business conditions were “good,” down from 21.0% in December.
• 15.4% said business conditions were “bad,” unchanged from December.
Consumers’ appraisals of the labor market plunged in January.
• 33.0% of consumers said jobs were “plentiful,” down from 37.1% in December.
• 16.8% of consumers said jobs were “hard to get,” up from 14.9%.
Expectations Six Months Hence
Consumers were less optimistic about the outlook for business conditions in January.
• 20.9% of consumers expected business conditions to improve, down from 22.7% in December.
• 18.7% expected business conditions to worsen, up from 17.3%.
Consumers’ assessments of the labor market outlook remained pessimistic.
• 19.4% of consumers expected more jobs to be available, down slightly from 19.8% in December.
• 20.3% anticipated fewer jobs, unchanged from December.
Consumers’ assessments of their income prospects were less optimistic in January.
• 18.3% of consumers expected their incomes to increase, down from 19.0% in December.
• 11.9% expected their incomes to decrease, down from 12.1%.
The monthly Consumer Confidence Survey, based on an online sample, is conducted for The Conference Board by Toluna. The cutoff date for the preliminary results was Jan. 20.