The initial December UoM consumer confidence index rose to 59.1 from 56.8 and that was 2 pts above the forecast. Both Current Conditions and Expectations components were up m/o/m. One yr inflation expectations moderated by 3 tenths to 4.6% “partly due to gas prices, which have fallen to levels similar to a year ago” but the 5-10 yr outlook (need a good crystal ball for this answer) held at 3.0%. The high print this year in confidence was seen in January at 67.2 and the low tick was 51.5 in July (when gasoline was around $5) and which compares with 101 in February 2020.
While the headline confidence number rose, helped by falling gasoline prices, employment expectations fell 1 pt to the weakest since August 2011. Those seeing ‘Higher Income’ fell 1 pt to a 5 month low and I wish we can segregate out that component in terms of blue and white collar.
With respect to gasoline prices, there was no change in those expecting them to ‘go down’ but a 10 pt drop in those that said they will ‘go up’ and a 10 pt rise in those believing they will ‘stay the same.’
After falling by 17 pts last month, plans to buy a major appliance rose 4 pts. Those that said it’s a good time to buy a car/truck was up 3 pts after falling by 7 last month. Those that want to buy a home increased by 3 pts but only after dropping by 10 pts in November.
The UoM said there were more notable gains in confidence for the higher income families “and those with larger stock holdings, supported by recent rises in financial markets.” And points to the still high sensitivity this income cohort has to the value of their stock and bond portfolios. On inflation, “Throughout the survey, concerns over high prices – which remain high relative to just prior to this current inflationary episode – have eased modestly.”
Bottom line, the cooling of some inflationary pressures, particularly gasoline helped to lift confidence but as seen, employment expectations continue to soften. On what this means for the consumer from here, the UoM speculated that “With the continued erosion of buying power of consumers, rapid increases in credit card and auto loan balances, and continued concerns over the high cost of borrowing, the strength in spending we have seen this year will be difficult to sustain.”
Not that this data is typically market moving but Treasury yields are at the highs of the morning and the dollar is also near the highs.
UoM
Employment Expectations
One yr Inflation Expectations