Consumer Confidence Continues Its Post-Election Surge in December

The Conference Board has released its consumer confidence index for December. The index rose to 113.7 from 109.4 in November. Bloomberg had a consensus estimate of 108.5, versus 107.1 in November, after the election bump took it up 6.3 points last month.

What has taken place is that confidence has surged following the November 8 election. The big jump last month was by 6.3 points to 107.1 in November. While a small gain was expected for December, this gain was nearly the same jump.

Investors and economists need to understand that these gains are actually mixed, even if the new reading is the highest in years. The Expectations Index rose sharply from 94.4 to 105.5, but the Present Situation Index actually decreased from 132.0 last month to 126.1.

The consumer sentiment report from the University of Michigan had risen sharply in November, and last week’s report for December showed a 98.2 reading, versus an expected 98.0 estimate. That report showed strength continuing in both the current conditions and the expectations components.

If we go back to the Consumer Confidence report rather than the rival Consumer Sentiment report from last week, the quote looks rather positive as well. Lynn Franco, Director of Economic Indicators at The Conference Board, said:

Consumer Confidence improved further in December, due solely to increasing Expectations which hit a 13-year high (Dec. 2003, 107.4). The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers. Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016. Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.

There are several general observations here to consider before getting to the details of each point. Consumers’ assessment of current conditions declined in December, but their short-term outlook improved considerably in December. Consumers’ outlook for the labor market also improved markedly. These were shown as follows:

  • Those saying business conditions are “good” decreased slightly from 29.7 percent to 29.2 percent.
  • Those saying business conditions are “bad” increased from 15.2 percent to 17.3 percent.
  • Those stating jobs are “plentiful” declined from 27.8 percent to 26.9 percent.
  • Those claiming jobs are “hard to get” increased from 21.2 percent to 22.5 percent.
  • Those expecting business conditions to improve over the next six months increased from 16.4 percent to 23.6 percent.
  • Those expecting business conditions to worsen declined from 9.9 percent to 8.7 percent.
  • The proportion expecting more jobs in the months ahead increased from 16.1 to 21.0 percent.
  • Those anticipating fewer jobs also increased, from 13.5 percent to 14.0 percent.
  • The percentage of consumers expecting their incomes to increase rose from 17.4 percent to 21.0 percent.
  • Those expecting a decrease in their incomes fell moderately, from 9.2 percent to 8.6 percent.