The Key Takeaways From December Consumer Confidence Data

Consumer confidence took a dip in December 2024, with The Conference Board's Consumer Confidence Index falling by 8.1 points to 104.7. This decline was primarily driven by a sharp drop in the Expectations Index, which tumbled 12.6 points to 81.1, nearing the threshold of 80 that usually signals a recession ahead. Let's delve into the key takeaways from this data and explore the factors contributing to the decline in consumer confidence.



1. Weakened Expectations for Business Conditions and Incomes
Consumers' expectations for future business conditions and incomes took a significant downturn in December. The Expectations Index's sharp decline was driven by consumers' weakened assessment of business conditions and their pessimism about future employment prospects. This pessimism is concerning, as it could lead to reduced consumer spending and economic growth.

2. Concerns about Tariffs and Inflation
Concerns about tariffs and inflation played a significant role in the decline of consumer confidence. Mentions of tariffs increased, with 46% of consumers expecting tariffs to raise the cost of living. Inflation dominated write-in responses, with consumers expecting food and gas prices to be more affordable in 2025. While consumers are worried about tariffs and inflation, they are not yet panicking about an economic downturn.



3. Labor Market Outlook and Consumer Confidence
In December 2024, consumers' assessments of the labor market improved, with 37.0% reporting jobs were "plentiful," up from 33.6% in November. However, their optimism about future employment prospects waned, with 18.3% expecting business conditions to worsen, up from 15.9%. This discrepancy suggests that while current labor market conditions are strong, consumers are concerned about potential future job insecurity, contributing to the overall decline in consumer confidence.

In conclusion, the decline in consumer confidence in December 2024 is a cause for concern, as it reflects consumers' pessimism about future business conditions and incomes, as well as their worries about tariffs and inflation. As investors, it is essential to monitor consumer confidence data, as it can provide valuable insights into the overall health of the economy and the potential for future economic growth. By staying informed about consumer sentiment, investors can make more informed decisions about their portfolios and adapt to changing market conditions.