Today's Report (12/22/2021)

The Conference Board Consumer Confidence Index increased again in December, after an upward revision in November. The Index now stands at 115.8 (1985=100), up from 111.9 (an upward revision) in November. The Present Situation Index—based on consumers' assessment of current business and labor market conditions—was relatively flat at 144.1, down from 144.4 last month. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—rose to 96.9 from 90.2.

"Consumer confidence improved further in December, following a very modest gain in November," said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. "The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased."

"Meanwhile, concerns about inflation declined after hitting a 13-year high last month as did concerns about COVID-19, despite reports of continued price increases and the emergence of the Omicron variant. Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic."

What is it?

Examines how consumers feel about jobs, the economy, and spending, placing more emphasis on household reaction to labor market conditions. It surveys different people every month, making it more erratic. It surveys expectations over the next 6 months.

What are the fundamental effects?

Confidence impacts consumer spending which affects economic growth. Happy consumers are good for business. An unhappy or insecure consumer is lousy for business. Any signs of a failing economy can set off alarms in Washington and Wall Street because consumer expenditure accounts for well over half of the economy’s total demand.

How does it affect the markets?

CURRENCY - A depressed consumer makes foreign investors with exposure in the US markets a bit nervous. It can raise the prospects of falling interest rates and a weakening business climate. They may sell the US currency in search of a stronger economy elsewhere.

STOCKS - Crumbling consumer confidence is not favorable to equities, because it can cause declining business sales. Shareholders hope consumer confidence stays high to encourage more spending.

BONDS - The focus is on whether economic growth goes overboard and leads to inflation. More confidence leads to more borrowing and spending, which can fuel faster economic growth and inflation. This can lead to bond prices declining.