U.S. consumer confidence retreats in December
Consumer confidence fell in December as consumers became less optimistic about future business conditions and incomes.
In preliminary results, the Conference Board's Consumer Confidence Index declined by 8.1 points in December to 104.7. The Present Situation Index — based on consumers' assessment of current business and labor market conditions — fell 1.2 points to 140.2. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions — tumbled 12.6 points to 81.1. (The cutoff date for preliminary results was December 16, 2024.)
"The recent rebound in consumer confidence was not sustained in December as the Index dropped back to the middle of the range that has prevailed over the past two years," said Dana M. Peterson, chief economist at The Conference Board. "While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop.”
Peterson noted that consumer views of current labor market conditions continued to improve, consistent with recent jobs and unemployment data. But their assessment of business conditions weakened.
“Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes,” Peterson said. “Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November."
Among age groups, December's fall in confidence was led by consumers over 35 years old; consumers under 35 became more confident. Among income groups, the decline was concentrated in consumers with household earnings between $25K and $100K, while consumers at the bottom and top of the income range reported only limited changes in confidence. On a six-month moving average basis, consumers aged under 35 and those earning over $100K remained the most confident.
Consumers also became a bit less bullish about the stock market in December: 52.9% expected stock prices to increase over the year ahead, down from a record high of 57.2% in November. The share of consumers expecting higher interest rates over the next 12 months ticked up to 48.5% but remained near recent lows.
Average 12-month inflation expectations stabilized at 5.0% in December, the lowest since March 2020. Additionally, references to inflation and prices dominated write-in responses. Asked what goods and services they expect to be more affordable in 2025, consumers mostly selected food and gas. Costs for gyms and live events, concerts, and sports were considered the least likely to be more affordable next year.
On a six-month moving average basis, purchasing plans for homes were down slightly in December, potentially reflecting rising mortgage rates despite Fed rate cuts. Purchasing plans for autos continued to increase, and more consumers planned to buy big-ticket items over the next 6 months than not. However, consumer buying plans for most appliances and electronics were still down on a 6-month moving average basis.
In write-in responses about factors affecting consumers' views of the economy, mentions of politics — including the outcome of November's elections — continued to rise. Mentions of tariffs also increased in December. Notably, a special question this month showed that 46% of US consumers expected tariffs to raise the cost of living while 21% expected tariffs to create more US jobs.