Consumer confidence advanced in December for the third month in a row, driven by a strong labor market and recovery in spending since September, despite risks from the omicron variant and inflation.
The Conference Board’s headline consumer confidence index rose by 3.9 points to 115.8 in December.
The headline consumer confidence index rose by 3.9 points to 115.8 on the month, the largest increase in three months and the highest since July, according to data from the Conference Board on Wednesday.
Such an increase in confidence was driven by the sharp decline in November’s unemployment rate—4.2% from 4.6% previously—as the two series are known for having a strong negative relationship.
The Conference Board’s gauge for employment—the labor differential index—fell by 2.1 percentage points on the month, yet remaining elevated at 42.6%, especially when compared to the reading a year ago at minus 1.9%.
Consumers believed that problems with inflation would ease in the coming months. Inflation in the next 12 months, according to survey respondents, would drop quite significantly to 6.9% from the record high 7.3% in November.
December’s spending is likely to gain momentum in the last month of the year as more respondents in December indicated that over the next six months they would buy automobiles, homes or major appliances compared to November.
The takeaway
The improvement in consumer confidence in December continues to reaffirm our case that the economy will finish the year at a faster pace than in the previous quarter.
Our forecast is pointing to 7.2% growth in gross domestic product in the fourth quarter, with GDP on pace to surpass 5% growth for all of 2021.
