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Consumer Confidence Index Drops Six Points in December

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The Conference Board Consumer Confidence Index, which had declined slightly in November, posted another decrease in December. The index now stands at 65.1, down from 71.5 in November. The Expectations Index declined sharply to 66.5 from 80.9. The Present Situation Index increased to 62.8 from 57.4 last month.

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However, consumers’ assessment of current conditions improved in December. Those stating business conditions are “good” rose to 17.1% from 14.6%, while those stating business conditions are “bad” decreased to 27.3% from 31.2%. Consumers’ appraisal of the labor market was mixed. Those saying jobs are “plentiful” edged down to 10.3% from 11.0%, while those saying jobs are “hard to get” declined to 35.6% from 37.4%.

Consumers’ optimism about the short-term outlook plummeted in December. The percentage of consumers expecting business conditions to improve over the next six months declined to 17.6% from 21.3%, while those expecting business conditions to worsen increased to 21.5% from 15.8%.

Consumers’ outlook for the labor market also turned more pessimistic. Those anticipating more jobs in the months ahead declined to 17.0% from 19.5%, while those expecting fewer jobs increased to 27.3% from 21.2%. The proportion of consumers expecting an increase in their incomes was virtually unchanged at 15.4%. However, those expecting their incomes to decline rose to 18.7% from 15.6%.

“Consumers’ expectations retreated sharply in December resulting in a decline in the overall index,” said Lynn Franco, director of economic indicators at the Conference Board. “The sudden turnaround in expectations was most likely caused by uncertainty surrounding the fiscal cliff. A similar decline in expectations was experienced in August 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for the Conference Board by Nielsen. The cutoff date for the preliminary results was December 13.

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