#United States #New York #Consumer Confidence #Conference Board #US Economy

Overview of the Decrease in Consumer Confidence

In December 2024, the Conference Board Consumer Confidence Index® experienced a notable decline of 8.1 points, dropping to 104.7 (1985=100). This downturn comes as consumers show increased concern about current and future economic conditions. The Present Situation Index, which assesses current business and labor market conditions, also fell slightly by 1.2 points, landing at 140.2. However, the most alarming statistic was in the Expectations Index, which reflects consumers' short-term outlook on income, business, and labor markets. This index tumbled by 12.6 points, reaching a level of 81.1 — a figure that is just above the threshold that typically indicates a potential recession.

The cutoff date for these preliminary results was December 16, 2024. According to Dana M. Peterson, Chief Economist at The Conference Board, the rise in consumer confidence seen earlier in the fall did not persist into December. Instead, the index reverted back to the mid-range that has characterized consumer sentiment over the last two years. Peterson stated, "We saw a drop in both the present situation and expectations components, with expectations experiencing the most substantial decrease."

Deterioration in Future Perspectives

Consumers expressed a pessimistic view regarding future business conditions and personal incomes compared to the previous months. Notably, the proportion of consumers expecting to see improvements in business conditions dropped significantly, while those anticipating deteriorating conditions rose. Concerns about job availability also resurfaced, marking a shift from the more optimistic views held in October and November.

Breaking it down by age, the decline in confidence was predominantly observed among individuals over 35, whereas the younger demographic of consumers under 35 reported a more optimistic outlook. Among different income levels, the dip in consumer confidence was particularly pronounced among those with household incomes ranging from $25,000 to $100,000. In contrast, those at the lower and higher ends of the income spectrum reflected minimal shifts in confidence levels.

The Changing Market Outlook

Additionally, a survey indicated a decrease in the percentage of consumers who believe stock prices will rise over the next year, from an all-time high of 57.2% in November to 52.9% in December. There was also a slight rise in the share of consumers anticipating higher interest rates over the coming year, with 48.5% expecting increases compared to previous figures. Conversely, the percentage expecting lower rates fell to 29.3%.

Despite the waning confidence, the proportion of respondents anticipating a recession within the next 12 months has stabilized at a low point. Assessments of personal financial situations, both current and anticipated for the next six months, have also declined significantly among consumers, suggesting an overall tightening in economic sentiment.

Average inflation expectations remained stagnant at 5.0%, marking the lowest point since March 2020. Consumer feedback leaned toward anticipating rising costs primarily in essentials like food and gas, while services such as gyms and entertainment did not present similarly optimistic forecasts for affordability in 2025.

Spending Trends

With regard to spending motivations, purchasing plans were slightly down for homes, possibly due to rising mortgage rates despite recent cuts in rates by the Federal Reserve. Interestingly, intentions to buy automobiles have risen, and more consumers plan on making major purchases in the upcoming six months. However, overall plans for appliances and electronics show a downward trend.

Services, particularly dining out and streaming, continued to attract consumer interest, while intentions to travel or attend movies dipped. Likewise, vacation plans for both domestic and international travel have diminished, pointing towards a cautious consumer mindset.

Finally, political outcomes and tariff expectations have increasingly influenced consumer outlooks on the economy, with 46% of respondents indicating that they believe tariffs will elevate living costs, while only 21% anticipate job creation from tariffs.

In summary, the recent Consumer Confidence Survey indicates that while current labor market conditions appear to be improving, consumers are becoming more cautious about the economy's future, reflecting underlying anxiety about potential economic downturns and job availability.