Will ETFs Suffer As US Consumer Confidence Drops In December?

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Consumer confidence in the United States seems to be sinking despite the introduction of a coronavirus vaccine. Weak labor market conditions and increasing restrictions due to the aggravating pandemic might be weighing on the metric, explaining the decline for the second consecutive month in December (per a Reuters article). The Conference Board's measure of consumer confidence index stands at 88.6 (the lowest since August), comparing unfavorably with November’s reading of 92.9. Moreover, December’s reading lagged the consensus estimate of 97, per a Reuters’ poll. Notably, the metric witnessed the biggest gain in 17 years in September but continued to be below the pre-pandemic level of 132.6 in February.

The Present Situation Index, which gauges consumer views on current business and labor market conditions, declined to 90.3 from 105.9 in November. Meanwhile, the Expectations Index, which is a measure of consumers’ short-term (for the next six months) outlook for income, business and labor market conditions, rose to 87.5 from 84.3 in November.

Moreover, the survey’s labor market differential, calculated from data on respondents’ views on whether sufficient jobs are available or hard to get, declined to a reading of (0.2) in December from 6.9 in November, per a Reuters article. Meanwhile, the uncertainty surrounding the coronavirus pandemic with the recent rise in the number of new cases may keep a check on consumer spending, in the near term at least. Also, consumers seem to be eagerly waiting for another round of Federal stimulus package.

In this regard, Lynn Franco, Senior Director of Economic Indicators at The Conference Board, reportedly said, “as a result, consumers’ vacation intentions, which had notably improved in October, have retreated. On the flip side, as consumers continue to hunker down at home, intentions to purchase appliances have risen. Overall, it appears that growth has weakened further in Q4, and consumers do not foresee the economy gaining any significant momentum in early 2021.”

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