Consumer confidence fell slightly in December. The Conference Board's Consumer Confidence Index was 91.3, down 1.2 points from the revised 92.5 in November. This was below economists' expectations of 93.5. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence was mixed across both portions of the Conference Board index. The Present Conditions index, down by 7.1 points to 73.9 in December, was responsible for the overall decline. This index measures how consumers perceive the current state of the economy.
The Expectations portion of the index, a measure of future economic activity, increased to 102.9 in December from 100.1 in November.
The University of Michigan's Consumer Sentiment Index, a comparable index, also decreased in December to 92.6 from 93.7 in November. Consistent with the Conference Board Index, a drop in Present Conditions caused the decline. The Present Conditions index fell 5.5 points to 97.0 in December, while the Expectations portion improved to 89.8 from 88.1 in November.
December declines in consumer confidence were unexpected. Despite the overall improving economy, several factors in December may have affected perceptions of current conditions during the month. Unemployment insurance claims rose slightly in December and employment gains were less than in previous months. In addition, snowstorms in the eastern U.S. may have dampened confidence as consumers had trouble completing holiday shopping and other preparations. As holiday shopping began, some may have realized decreased cash flows as tax rebates and mortgage refinancing from earlier in the year have already been spent.
Despite this, the slight decrease in December is expected to be temporary, given the labor markets continue to grow and the economy keeps moving toward recovery. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a closely watched economic indicator.
Sources: www.conference-board.com
www.economy.com
