Consumer Confidence Continues to Fall From Record Highs

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The Conference Board reported Tuesday morning that its consumer confidence index for January dipped on the back of the government shutdown and tumultuous financial markets. The index fell to 120.2 in January from 126.6 in December. The expectations index dropped from 97.7 to 87.3, and the present situation index declined slightly from 169.9 to 169.6.

Keep in mind that back in October the index set an 18-year high at 137.9.

Consumers’ appraisal of current conditions was little changed in January. The percentage of consumers claiming business conditions are “good” was virtually unchanged at 37.4%, while those saying business conditions are “bad” decreased from 11.6% to 11.1%.

Consumers’ optimism about the short-term future was more pessimistic in January. The percentage of consumers expecting business conditions will improve over the next six months decreased from 18.1% to 16.0%, while those expecting business conditions will worsen increased from 10.6% to 14.8%.

Consumers’ outlook for the labor market was also less favorable. The proportion expecting more jobs in the months ahead decreased from 16.6% to 14.7%, while those anticipating fewer jobs increased, from 14.6% to 16.5%.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, commented:

Consumer Confidence declined in January, following a decrease in December. The Present Situation Index was virtually unchanged, suggesting economic conditions remain favorable. Expectations, however, declined sharply as financial market volatility and the government shutdown appear to have impacted consumers. Shock events such as government shutdowns (i.e. 2013) tend to have sharp, but temporary, impacts on consumer confidence. Thus, it appears that this month’s decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months.

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