US Consumer Confidence Drops to Four-Month Low, Clouding Economic Outlook
The Conference Board's index fell for a fifth straight month as households grapple with persistent inflation and a cooling labor market, raising questions about future spending.
A key gauge of American optimism fell for the fifth consecutive month in December, as persistent inflation and a cooling job market soured households' views on the U.S. economy. The Conference Board reported Tuesday that its Consumer Confidence Index dropped by 3.8 points to 89.1, its lowest level since September.
The decline was broad-based, with consumers' assessment of current business conditions turning negative for the first time in four months. The survey underscores a growing anxiety among Americans about their financial prospects, a sentiment that complicates the economic picture even as other data points suggest resilience.
"December’s dip in confidence was visible across all income brackets," said Dana M. Peterson, Chief Economist at The Conference Board, in a statement. Peterson noted that the primary drivers were deepening worries about job security and future income, coupled with ongoing concerns about high prices. The PRNewswire release highlighted that consumers' plans for big-ticket purchases like homes, cars, and major appliances all retreated in December.
Diving deeper into the report, the Expectations Index—which measures consumers' short-term outlook for income, business, and labor market conditions—remained below 80 for the eleventh straight month. This threshold is historically associated with a heightened probability of a recession within the next year, signaling a deep-seated apprehension about the economic path forward.
Yet, this pervasive gloom appears at odds with recent spending activity. Paradoxically, preliminary data for the holiday shopping season indicates that retail sales have been robust. Reports from Visa and Mastercard showed a 4% increase in U.S. holiday retail sales, fueled by a significant 7.8% jump in online shopping.
Economists point to a "K-shaped" economic landscape to explain the discrepancy. Higher-income households, whose finances have remained relatively insulated, continue to spend, propping up headline retail numbers. Meanwhile, lower- and middle-income consumers, who are more sensitive to inflation and borrowing costs, are expressing their financial strain through surveys like the Conference Board's index.
The persistent weakness in consumer sentiment presents a challenge for policymakers at the Federal Reserve. After a year of aggressive rate hikes, the central bank is navigating a complex environment. The U.S. economy has shown signs of slowing, with Real Gross Domestic Product contracting at a 0.5% rate in the first quarter of 2025, according to the Bureau of Economic Analysis. While the Fed enacted a quarter-point rate cut in December, it also signaled a potential pause, looking for clearer signs of the economy's direction. This latest confidence reading suggests the consumer engine of the economy may be sputtering, a critical factor for the Fed's upcoming policy decisions.