What Consumers are Expecting Now and Through Mid-2023
The markets just got a solid sign that it may be a prosperous new year. The Consumer Confidence Index is one of the better leading indicators of future economic activity and the number came out well above expectations. This report shows consumer attitudes, buying intentions, vacation plans, and expectations for inflation, stock values, and interest rates are now, overall, very positive. These attitudes should play out in spending, and that spending should eventually show up in company earnings.
How Good Was the Report?
After back-to-back monthly declines in the index, which stood at 101.4 in November (1985=100), the December post came out at 108.3. This is an eight-month high, and stands in contrast to economists expected decline to 101.2. The break down shows fewer concerns over inflation and more optimism about the economy, job conditions, and even inflation.
Refining the Reports Components
Overall confidence was shown in the two separate underlying measures, including the Present Situation Index, which is derived from a survey of consumers’ thoughts of current business and labor market conditions. This increased to 147.2 from 138.3 last month. The Expectations Index is based on consumers’ short-term outlook for income, business, and labor market conditions, this subset of data improved to 82.4 from 76.7. As a note, 82.4 is a vast improvement, but economists generally associate 80 with a possible recession.
Present Situation – Consumers’ assessment of current business conditions improved in December.
19.0% of consumers said business conditions were “good,” up from 17.8%.
20.1% said business conditions were “bad,” down from 23.6%.
47.8% of consumers said jobs were “plentiful,” up from 45.2%.
12.0% of consumers said jobs were “hard to get,” down from 13.7%.
Expectations Index (Six Months forward) – Consumers’ Assessment of future business conditions improved in December.
20.4% of consumers expect business conditions to improve, up from 19.8%.
20.3% expect business conditions to worsen, down from 21.0%.
19.5% of consumers expect more jobs to be available, up from 18.5%.
18.3% anticipate fewer jobs, down from 21.2%.
16.7% of consumers expect their incomes to increase, down slightly from 17.1%.
13.3% expect their incomes will decrease, down from 15.8%.
The monthly Consumer Confidence Survey® had a data cutoff date of December 15. This makes the forward-looking attitudes fresh, and useable.
The one question that many investors are asking themselves after the worst equity markets in 15 years is if it is time to deploy some capital into the beaten-down market. The confidence numbers suggest that individuals are more likely to open up their wallets now than they have been in two quarters. This could bolster earnings later next year.
If the worst is behind us, this could be reflected at some point in the next six months in companies that are supported by consumer spending (based on these numbers) and not business spending.
Managing Editor, Channelchek