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January 31, 2018 Blog 1 min read
 Consumer confidence advances in January, beating expectations.

 Graph showing consumer confidenceThe Conference Board’s Consumer Confidence Index advanced in January, reaching 125.4, as consumers grew increasingly optimistic about the outlook for the economy in the coming months. Economists had called for a more muted improvement from the index’s December reading of 123.1.


By virtually any measure, consumers remain very upbeat in their assessment of both the current state of the economy and their expectations for the next few quarters, and the uptick suggests no near-term breakdown in that demeanor, despite some sources of uncertainty.


Of particular note perhaps is the lack of clarity around near-term income prospects, as consumers wait to see how the recently passed tax reform legislation will impact their take home pay and tax bill for 2018. Given the complexity of the changes and starkly differing views put forward by politicians and the talking heads on the news, it’s no surprise that the average American does not yet have a handle on what it means for them. That lack of certainty is likely reflected in  what the Conference Board termed “ambivalent” consumer expectations for income growth in the coming months.


Also evident in the survey results was the divergence in views on the availability of jobs and business conditions, perhaps reflecting the polarization of political views, disagreement over the direction of the country, and the differing experiences of respondents as well.  The percentage of consumers that suggested that jobs were “plentiful” increased, even as the percentage of survey respondents indicating that they were “hard to get” also rose.  Similarly, the percentage looking for better business conditions edged higher at the same time that those expecting them to worsen also increased.


It’s impossible to say what specific factors may be behind that divide, but it’s clear that – at least at the margins – the divergence in views suggests that not all consumers hold a universal view that the economy is headed in the right direction.  If anything, it’s another indication that there is room for continued improvement.


Having said that, the bottom line is that consumers remain exceptionally upbeat about both the current state and the future direction of the economy.  That bodes well for spending, with the potential for tax cuts to provide a bit of additional fuel for spending in the coming months.

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