Consumer confidence in the US economy rose more than expected as inflation eased and gas prices cooled by the end of 2022. The Conference Board’s Consumer Confidence Index rose to 108.3 in December from a reading of 101.4 in November – the highest reading since the previous April.
Economists had expected the index to inch up to 101.0 from the 100.2 originally reported for the previous month.
The headline index rose sharply as the Present situation index jumped to 147.2 in December from 138.3 in November, while the expectations index climbed to 82.4 from 76.7.
“Current conditions indicators and expectations improved due to consumers’ more favorable outlook on the economy and jobs. Inflation expectations in December fell back to their lowest level since September 2021, with the recent decline in gas prices, a major impetus,” said Lynn Franco, The Conference Board’s senior director of economic indicators.
Meanwhile, a survey by the University of Michigan showed that the consumer confidence index rose to 59.7 for December from November’s reading of 56.8 which was up from a preliminary estimate of 59.1.
“Sentiment remains below 15% relative to a year ago, but extremely negative consumer sentiment has softened this month on easing pressure from inflation,” said survey director Joanne Hsu.
He said, “One-year business conditions rose 25%, and the long-term outlook improved by a more modest but still sizeable 9%. Still, both measures are below 2021 readings. Personal financial assessments, both current and future, were largely unchanged in November.”
Inflation expectations fell markedly from a year ago, from 4.9% in November to 4.4% in December (initial: 4.6%). It was their lowest reading for 18 months but was “well above” levels recorded two years ago, Hsu added.
Over a five to ten year horizon, inflation expectations fell by one-tenth of a percentage point to 2.9% (initial: 3.0%) in November.
Although the Federal Reserve has moderated the pace of its interest rate hikes to fight inflation, officials have indicated there is still some way to go.
However, according to The Conference Board, consumers are less pessimistic about the short-term business outlook and the labor market, but overall expectations “remain at a recession-related level.”
Rubella Farooqui of High Frequency Economics said in a note, “The (overall) level remains depressed compared to pre-pandemic readings.”