Concern About Labor Market Conditions Drives Decline in Consumer Confidence

Consumer confidence declined in January but remained within the narrow range it has been in since 2022, The Conference Board said Tuesday (Jan. 28).

The group’s Consumer Confidence Index declined by 5.4 points in January to 104.1, according to a Tuesday press release.

There was a “sharp” drop of 9.7 points in the Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions, and a drop of 2.6 points in the Expectations Index, which is based on consumers’ short-term outlook for income, business and labor market conditions, according to the release.

The cutoff date for preliminary results was Jan. 20, per the release.

“All five components of the Index deteriorated but consumers’ assessments of the present situation experienced the largest decline,” Dana M. Peterson, chief economist at The Conference Board, said in the release. “Notably, views of current labor market conditions fell for the first time since September, while assessments of business conditions weakened for the second month in a row.”

Peterson also highlighted findings that consumers showed less optimism about future business conditions, a bit less optimism about income, and a return to pessimism about future employment prospects.

At the same time, the survey found that consumers displayed more positive views of their family’s current financial situation, a new series high in six-month expectations for family finances, and a near series low expectation of a recession over the next 12 months, Peterson said in the release.

Analysts had expected The Conference Board’s Consumer Confidence Index to rise to 105.8, rather than fall, Bloomberg reported Tuesday.

Similarly, Reuters reported Tuesday that the economists it polled before the release of the results had forecast a reading of 105.6.

The University of Michigan’s January Surveys of Consumers reported Friday (Jan. 24) that there was a 4% decline in consumer sentiment in January, marking the first decline in six months.

The report found that consumers’ concerns about unemployment and inflation drove the decline.

“While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back,” Surveys of Consumers Director Joanne Hsu wrote in a Friday press release.

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