Consumer confidence in the economy continues to waver, despite easing inflation.
The Conference Board’s consumer confidence index — a closely watched metric gauging attitudes about the current and future strength of the economy — measured 107.1 in January, according to data released Tuesday by the business think tank. It was down from an upwardly revised 109 in December and below economists’ expectations.
Economists were expecting the index to land at 109 in January, according to estimates on Refinitiv.
The present situation index increased to 150.9 this month from 147.4 last month, according to the report, indicating that consumer confidence increased, with business conditions and jobs both being plentiful.
But while consumers are starting 2023 feeling better about the current economic and labor market conditions, their confidence has waned about what’s to come in the next six months, said Ataman Ozyildirim, the Conference Board’s senior director of economics.
The expectations index slumped to 77.8 in January, from 83.4 the month before. A reading below 80 often signals a recession occurring within the next year, according to the conference board.
“Consumers were less upbeat about the short-term outlook for jobs,” Ozyildirim said in a statement. “They also expect business conditions to worsen in the near term. Despite that, consumers expect their incomes to remain relatively stable in the months ahead.”
Consumers’ plans for buying autos and appliances held steady; however, fewer consumers are planning on purchasing a home, he noted.
The conference board’s confidence index and the University of Michigan’s twice-a-month consumer sentiment index are two leading gauges of consumers’ attitudes toward the current and future strength of the economy. Although the two indexes typically track similarly over time, the consumer confidence index is more influenced by employment and labor market conditions, while the Michigan sentiment index has a greater emphasis on household finances and the impact of inflation.
The lower consumer confidence reading comes as other economic indicators show signs of softening. New data released separately on Tuesday showed home price growth moderating and workers’ wage growth slowing.
“The [Federal Reserve’s] rate hikes in 2022 were successful at cooling an overheated economy, as demonstrated by softer data on housing prices, wages, and consumer confidence at the turn of the year,” Bill Adams, chief economist for Dallas-based Comerica Bank, said in a statement. “The Fed will welcome signs of a cooling economy, but they want to see a wider margin of slack open up to be confident that the slower inflation in late 2022 becomes the trend.”
The Fed on Tuesday kicked off its first policymaking meeting for 2023. The two-day meeting is expected to conclude with the central bank raising its benchmark rate by a quarter-point.