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Summary

The Conference Boards' consumer confidence index surprised to the upside in December, rising to an eight-month high of 108.3. December's performance easily exceeded even the highest economist expectation and suggests there is material improvement in consumers' attitudes as 2022 comes to a close.

Confidence Ends 2022 on an Upbeat Note

The Conference Board's consumer confidence index increased more than expected in December, sparked by falling gasoline prices and an improved assessment about the labor market. The improvement is consistent with the preliminary December reading of the University of Michigan's consumer sentiment index, which climbed 2.3 points from November's level.

The present situation index, which measures consumers' assessment of current business and labor conditions, increased nearly 9 percentage points in December to a three-month high of 147.2. The expectations index, which is based on consumers' outlook for labor, income and business conditions over the next six months, also improved rising 5.7 percentage points to a level of 82.4.

The bounce back in consumer confidence following declines in October and November reflects easing concerns about inflation and more favorable views of the labor market. Consumers' expectations of near-term labor market conditions have been trending down since March. However, attitudes improved this month as the net percentage of survey respondents noting that jobs were "plentiful", versus "hard to get", was 47.8% in December, up from 45.2% in November. While the economy has been softening, consumers are still pretty confident about their ability to find a job.

Optimism extended beyond the current assessment with a more favorable view of the near-term outlook. Expectations for "better" business conditions increased to its highest level since February, while expectations for "more jobs" fully retraced November's percentage point decline. Even as consumers were relatively more sanguine about future employment and inflation prospects, that optimism did not translate to future income expectations. Consumer assessment of income expectations six-months out declined for the second straight month in December and suggest financial prospects will remain a concern for consumers in 2023.

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