U.S. consumer sentiment index falls more than expected in December, but remain elevated

The U.S. Conference Board’s index of consumer sentiment dropped more than expected in December. The index dropped to 122.1, as compared with consensus expectations of 128. The figure for November was also downwardly revised to 128.6 from 129.5. The present situation index continued to rebound from 154.9 to 156.6; however, the expectations measure dropped sharply to 99.1 and drove the fall in the overall confidence index to its lowest since September.

This is the first time the expectations component has dropped below the 100 mark since June and it is the lowest figure since October 2016. The labor differential measure, which captures whether consumers view jobs as plentiful or hard to get, continued to be strong at 20.5 and indicates that a buoyant labor market is aiding in keeping the “present situation” component solid.

Despite the unexpected drop in the headline and expectations component in the December survey, both indices continue to be elevated and are still in line with household confidence being on a strong footing, which has also been seen in the University of Michigan consumer survey, stated Barclays in a research report.

“On the whole, we view the buoyant consumer confidence conditions as constructive for consumer spending in Q4 and beyond”, added Barclays.

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