Skip to Content

Consumer sentiment rose unexpectedly in December

December 21, 2022 Blog 1 min read
Jim Baird Wealth Management
December consumer confidence surprised to the upside, but can it be sustained? The jobs market may hold the answer in the months ahead.

Consumer Confidence Index - History chart

Recession risks may be rising, but growing evidence that inflation pressures are finally easing was enough to lift some of the gloom that has hung over the consumer sector for much of the year.

The Conference Board’s measure of consumer confidence rose unexpectedly to 108.3 in December — easily surpassing the consensus forecast for 101.0. The increase was driven by a more upbeat assessment of the current state of the economy and a little less gloom about the outlook for 2023.

The strength of the labor market is a critical driver of the collective consumer mood. When unemployment is low and jobs are plentiful, the underpinning for household spending and outlook tends to be more positive. That appears to be the case today despite a recent uptick in layoffs and other clear evidence that recession risk is rising.

That doesn’t tell the whole story though; employment conditions have been an unambiguous bright spot for the economy over the past year, even as GDP turned negative early in the year and the one-two punch of inflation and rising interest rates hit American pocketbooks.

What’s changed? Inflation is still high but receding from its summer peak. The Fed is still raising rates, but all indications are that the end of the tightening cycle may be within sight. The light at the end of the inflation/interest rate tunnel appears to be enough to provide more than a glimmer of hope for consumers that have tired of paying more on every successive trip to grocery stores, gas stations, or restaurants.

Even so, consumers remain understandably restrained in their outlook for 2023. The expectations index rose from 76.7 to 82.4 — a solid increase in a relatively brief period — but remains near recession levels. Can the improving trend in confidence be sustained? It will be a challenge, particularly with so many leading indicators pointing toward greater weakness in the months ahead.

The bottom line? Better inflation readings have been a source of relief for consumers, but the growing risk of recession will be the next challenge that’s coming into view. Employment conditions may hold the key. If job creation stalls and layoffs mount, any nascent resurgence optimism could prove to be short lived.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

Related Thinking

People sitting around a table talking
December 21, 2022

Consumer sentiment rose unexpectedly in December

Blog 1 min read
empty office
December 8, 2022

Jobless claims rise but still remain in line with forecasts

Blog 1 min read
Empty desk with chair
December 2, 2022

The unemployment rate held steady in November

Blog 2 min read