Consumer Confidence Declines Further in January; Inflation Expectations Edge Higher

The Conference Board's Index of Consumer Confidence fell 4.9% (-6.1% y/y) during January to 104.1 after declining 2.9%, revised from -7.2%, during December. The level of confidence remains up from a low of 97.5 in April. The Action Economics Forecast Survey expected a reading of 106.0 for January. Consumer confidence has been fluctuating between 97.5 and 114.0 over the past two years.

Both components of the index fell this month. The Present Situation index fell 6.7% in January (-13.3% y/y) to 134.3 after a 1.8% December rise, revised from a 0.8% fall. The Present Situation series improved 3.9% in November. The Expectations Index dropped 3.0% in January (+2.9% y/y) to 83.9 after falling 7.7% in December, revised from a 13.4% decline. The Expectations component rose 2.0% in November.

The percentage of respondents assessing business conditions as “good” fell to 18.4% this month after declining to 21.0% in December. It was the lowest percentage in four months. The percentage assessing conditions as “bad” held steady at 15.4%. The appraisal of labor market conditions deteriorated in January as 33.0% of respondents thought jobs were plentiful, down from 37.1% in December. Jobs were viewed as hard to get by 16.8% of respondents this month following 14.9% in December. This measure has risen steadily this year from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell m/m to 16.2% and remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions worsened in January. A lessened 20.9% of respondents expect conditions to improve over the next six months, down from 22.7% in December, while a higher 18.7% expect them to deteriorate, up from 17.3% in December. On employment, a lessened 19.4% expect the number of jobs to increase over the next six months. A steady 20.3% of respondents expect the number of jobs to decline. A lessened 18.3% expect income to increase in six months versus 19.0% in December. That remained down from 20.7% in November and compares to 11.9% who expect income to decrease.

The expected rate of price inflation over the next twelve months rose to 5.3% in January from 5.1% in December, still nearly the lowest since March 2020. Interest rates are expected to rise over the year by 51.4% of respondents, up from 49.1% in December. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 52.9% from 54.8% in December, while the percentage expecting a decline in stock prices increased to 23.7% from 23.3%.

The percentage of respondents planning to buy a home in January fell to 52.2%, its lowest in five months. Plans to purchase an automobile dropped to 11.8% this month from 13.1% in December.

The Consumer Confidence data are available in Haver’s CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and market expectations are in AS1REPNA.