The Conference Board’s measure of consumer confidence fell modestly in January to 111.8, decreasing from last month’s revised reading of 113.3. The result fell short of economist expectations for a more moderate decline.
The modest reversal in what had otherwise been a strong upswing in confidence in recent months is far from concerning. The confidence index reached a 15-year high in December, driven predominantly by what the Conference Board called “a post-election surge in optimism for the economy, jobs, and income prospects.”
That December surge was coupled with the Board’s measure of expectations for higher stock prices reaching a 13-year high, following the broad post-election market rally and the prospects for a more pro-business, pro-growth policy agenda under President Trump.
Underlying an overall positive outlook in the survey were divergent views on current conditions and future expectations. The aggregate view of current conditions continued to improve, while their short-term outlook for business conditions, job availability, and income potential dimmed moderately, while remaining broadly favorable.
From a big picture perspective, the moderation in consumer optimism is likely attributable – at least in part – to a return to normalcy following the typical bounce in confidence that follows a presidential election. Perhaps it’s a sense of relief that the process itself is over and the country can move forward with some degree of clarity or perhaps it’s a result of less negative campaign talk about the state of the economy. Whatever the reason, the narrative of a post-election bounce in confidence followed by a more tempered view as reality sets in is not unusual.
Stripping out the noise, the bottom line is that the consumer sector is still well-positioned, supported by tight labor market conditions, strengthening wage gains, and still low interest rates. A confident consumer – coupled with additional fuel for spending – should be poised for further spending growth in the coming months, providing a key support to the economy as a whole.