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Consumers Grow More Optimistic About the Outlook in January – Robert Hughes (01/29/2021)

The Consumer Confidence Index from The Conference Board rose in January, increasing by 2.2 points to 89.3. The index is constructed so that it equals 100 in 1985. Overall consumer confidence remains well below the pre-pandemic level (see first chart).

The two major components of the index had mostly offsetting performances for the month though the gain in expectations was slightly stronger than the decline in current conditions. The present-situation component fell 2.8 points to 84.4 while the expectations component rose 5.5 points, taking it to 92.5 from 87.0 in the prior month (see first chart). The report suggests that the resurgence of Covid-19 is weighing on consumers’ views of current conditions.

For the present situation component, The Conference Board report says, “Consumers’ appraisal of present-day conditions weakened further in January, with Covid-19 still the major suppressor.” The net of the percentage of consumers saying business conditions were good minus those saying business conditions were bad fell to -27.0 in January from -24.3 while the net percentage of consumers saying jobs were plentiful minus those saying jobs were hard to get fell to -3.2 from -1.9 (see top of second chart).

Regarding the expectations component, the report states, “Consumers’ expectations for the economy and jobs, however, advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future.” Consumers’ expectations for business conditions in six months improved with the net percentage rising to 15.6 from 7.5 while the net percentage expecting better labor market conditions rose to 9.9 from 5.8 in December (see bottom of second chart).

Overall, consumer attitudes remain cautious. The surging number of new Covid-19 cases are weighing on consumers’ minds, hurting views of current conditions. However, the rollout of a vaccine and less political drama are likely helping boost future expectations.


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