Consumer confidence in January plunged to its lowest level since May 2014, reaching 84.5 and falling below the consensus forecast of 90.0, the Conference Board reported on Tuesday.
While a decline was expected for January, the scale of the drop was a surprise.
Following an upward revision to December’s figure—now reported at 94.2—there is a possibility that January’s dismal print could also be revised higher in future releases.
Nevertheless, the current data suggests a severe holiday spending hangover. In the post-pandemic era, spending has consistently retreated at the start of the year as consumers front-load purchases in the fourth quarter, a trend that persists even after seasonal adjustments.
We expect this pattern to hold despite significant fiscal tailwinds. Tax refunds, for example, are projected to rise by an estimated $100 billion collectively in the first quarter.
Bur the outlook could darken further as a potential government shutdown looms ahead of the Jan. 30 deadline, threatening to delay these critical cash infusions.
Read more insights from RSM’s global team of economists.
A primary driver of the confidence slump is the growing unease over the labor market. The differential between consumers claiming jobs are plentiful versus hard to get has narrowed significantly to a new low.
The share of respondents finding jobs plentiful fell to 23.9%, while those finding them hard to get rose to 20.8%. This deterioration highlights expectations of a cooling labor market that may increasingly decouple from broader economic growth.
