Confidence among U.S. consumers rose to its highest level in five months as Americans brushed off concerns about inflation and the spread of Omicron, though both factors loom large as headwinds for sentiment going forward.
The Conference Board’s consumer confidence index rose in December to a reading of 115.8, its highest level since July. That’s up from an upwardly revised 111.9 in November, when concerns about prices rising at their highest level in decades were the chief factor driving down sentiment.
“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,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement.
Consumer price inflation hit 6.8 percent in the year through November, a 31-year high. Rising prices have become a key worry among U.S. consumers, more so than unemployment, according to Richard Curtin, director of the University of Michigan’s closely watched Consumer Sentiment Index, a separate confidence measure.
“When directly asked whether inflation or unemployment was the more serious problem facing the nation, 76 percent selected inflation while just 21 percent selected unemployment,” Curtin said in a statement accompanying the latest Michigan University survey reading for early December, which showed a slight uptick in consumer confidence compared to November’s decade low.
The Conference Board’s present situation index, a gauge of current business and labor market conditions, edged down to 144.1 in December from 144.4 in the prior month.
“The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021,” Franco said.
The expectations index, which measures consumers’ six-months-ahead outlook for income, business, and labor market conditions, jumped to 96.9 from 90.2.
Franco said there was an increase in the proportion of consumers planning to buy homes, cars, and major appliances over the next six months, setting the stage for more economic growth early next year. Headwinds to the future outlook remain, however, with a rise in COVID-19 infections having the potential to dampen economic activity in the first quarter.
“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,” Franco said.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, predicted that the “confidence gain likely won’t last,” adding that “rocketing” home prices would likely serve as a check on upbeat sentiment.
The red-hot housing market has been boosted by low mortgage rates and continued recovery in the jobs market, with data from the National Association of Realtors (NAR) indicating that November marked the 117 straight month of year-over-year house price rises, the longest-running streak on record.
Lawrence Yun, NAR’s chief economist, predicted that house prices will continue to climb in 2022, though at a slower pace.
From The Epoch Times