U.S. Consumer Confidence Improves Further in January

The Conference Board's Index of Consumer Confidence increased 6.3% (8.3% y/y) this month to 114.8 after strengthening 6.9% to 108.0 in December, revised from 110.7. The latest figure remained well below the high of 137.9 in October 2018 and below the June 2021 high of 128.9. A reading of 113.0 had been expected in the Action Economics Forecast Survey.

The Present Situations Index rose 9.6% (6.8% y/y) to 161.3 this month after rising 7.8% in December. It was the highest level since March 2020. The Expectations Index improved 2.3% (10.3% y/y) to 83.8 after two straight months of strong increase. It was the highest level in six months.

Twenty-three percent of respondents characterized current business conditions as good in January, up from 18.3% three months earlier, but remained below a high of 23.4% in June. Recent figures are above their low of 16.3% in July of 2022. Labor market readings also improved greatly this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful versus those saying jobs are hard to get, rose to 35.7% from 27.3% in December. The reading remained below the March 2022 high of 47.1%. Calculated by Haver Analytics, this series has a 64% correlation with the unemployment rate over the last ten years. The jobs plentiful measure rose to 45.5% from 40.4% but remained down from the March 2022 high of 56.7%. The jobs hard-to-get measure of 9.8% compared to 13.1% in December. The jobs not-so-plentiful reading eased to 44.7% and stands well above its 30.5% low in September 2021.

Consumers assessment of future business conditions deteriorated as a lower 16.6% of respondents felt that conditions would be better in six months. This remained up, however, from a low of 13.2% in May but still below a high of 20.9% in December 2022. A lessened 16.0% of respondents felt there would be more jobs in six months. This remains below 20.0% in December of 2022. A lessened 16.4% expected income to increase in six months, up from 15.6% three months ago, but below a high of 19.6% in October of 2022.

The expected inflation rate in twelve months of 5.2% compared to 5.5% in December. It remained below the 7.9% high in June 2022, but above the 4.4% low in January 2020.

A greatly lessened 41.5% of respondents felt that interest rates would be higher in twelve months, compared to 59.4% in October. A higher 26.5% thought they would be lower. A lessened 37.2% of respondents believed that stock prices would be higher in twelve months, compared to 38.2% in December. A lessened 24.9% thought stock prices would be lower in twelve months versus a high of 44.7% in July of 2022. The share of respondents planning to buy a home within six months fell sharply to 4.7% from 5.3% in December and remained below the October 2022 high of 7.4%. The percentage of respondents planning to buy a major appliance weakened to 42.5%, remaining below a high of 52.4% in October 2022.

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.