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• The US Conference Board has released its monthly consumer confidence index figures for December 2023.
• It reported significantly higher levels of confidence than expected.
• Such a surge in optimism could well be an indicator of good times ahead in 2024 for the US.

The United States Conference Board has released its monthly consumer confidence index figures for December 2023.

In it, the index figures rose substantially for both present and forward-looking sentiment. Its ‘expectations index’, based on consumers’ outlooks for the coming months in relation to business, income, and labor conditions, rose from 77.4 in November to 85.6. (The index rates confidence levels as able to drop to as low as 20 and up as high as 140, as compared with a 1985 baseline of 100).

Meanwhile the ‘present situations index’ similarly rose from 101 in November to 110.7 in December (as compared with a baseline of 100 in 1985), exceeding expectations.

These are the highest consumer confidence figures in almost half a year, and represent the highest increase of confidence in a single month in almost three years.
 

Macro-level optimism

Crucially, the part of the index which looks to six-month future timelines, reported widespread optimism about the economic climate of next year, as relating to 2023’s prevailing headwinds. In fact, according to the Conference Board’s chief economist Dana Peterson, people are already beginning to spend more in anticipation of a better year ahead:

 

Expectations that interest rates will rise in the year ahead plummeted to the lowest levels since January 2021, and consumers’ outlook for stock prices rose to levels of optimism last seen in mid-2021. Meanwhile, average 12-month inflation expectations continued to recede, and now stands at 5.6 percent. Consumers’ views of their expected family financial situation, six months hence (not included in calculating the Expectations Index) also improved in December. Likewise, on a month-to-month basis, buying plans for autos, homes, and big-ticket appliances rose moderately across the board.”

Fear of inflation remains a top concern

Peterson continued by saying:

 

December’s write-in responses revealed the top issue affecting consumers remains rising prices in general, while politics, interest rates, and global conflicts all saw downticks as top concerns. Consumers’ perceived likelihood of a US recession over the next 12 months abated in December to the lowest level seen this year—though two-thirds still perceive a downturn is possible in 2024.”

Why the consumer confidence index matters

Typically, consumer confidence figures are significant because they indicate the grassroots sentiment of an economy. If consumer confidence increases, this is usually followed by other signs of bullishness like increased spending for both individuals and businesses in the coming months. In this way, it’s a useful leading indicator that many analysts and experts will look to in uncertain economic times to tell them which way a market’s overall sentiment will blow in a few months’ time.
 

What December’s confidence spike means

In this month’s case, the figures seem to echo the sentiment of other metrics so far in rising hope for the United States of escaping recession, nailing the ‘soft landing’ for year-end, and going into 2024 with even more hope of interest rate cuts, without the subsequent spiraling inflation.

As the Conference Board said in its press release on the matter: “Consumers end 2023 with a surge of confidence and restored optimism for 2024”.

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