U.S. consumer confidence dropped in December, nearing recession levels.

According to the latest data released by The 10 yuan futures trading appConference Board, the consumer confidence index in December fell to 104.7 from 112.8 in the previous month, a drop of 8.1 points. This level reflects consumers' pessimistic outlook on the economy, employment, and income prospects. The present situation index slightly declined to 140.2, while the expectations index sharply dropped to 81.1, only slightly above the recession alarm line of 80 points.

Consumer Confidence Falls to Mid-Level of Nearly Two Years

Economists at The Conference Board pointed out that consumer confidence in December failed to continue the rebound trend of the previous two months, with the index falling to a mid-level of the past two years. The significant decline in the expectations index reflects consumers' pessimistic views on the future economy and labor market, noticeably weakening confidence in business conditions and income. Although the evaluation of the labor market has improved somewhat, the assessment of the business environment has significantly worsened, offsetting the optimism of the past two months.

In terms of demographics, the decline in confidence is primarily concentrated among those over 35, while the confidence of consumers under 35 has improved. By income bracket, consumer confidence among households earning between $25,000 to $100,000 experienced the most significant decline, while changes were smaller for those below or above this range.

Stock Market and Interest Rate Expectations Change

Consumers' optimism about the stock market outlook has diminished. The proportion expecting stock prices to rise in the next year fell from 57.2% to 52.9%, while those expecting a decrease rose from 21.7% to 25%. Meanwhile, the proportion of consumers expecting interest rates to rise in the next 12 months rose to 48.5%, still near a recent low; those expecting a decrease in rates fell to 29.3%.

Spending Intentions and Inflation Expectations Diverge

Consumers' assessments of their household financial situation over the next 12 months have significantly weakened, particularly among low-income families worried about rising living costs. However, inflation expectations in December remained stable, with an annualized forecast of 5.0%, the lowest level since March 2020.

In terms of spending intentions, housing plans slightly decreased due to rising mortgage rates, but intentions for vehicle purchases continued to grow. Intentions to purchase durable goods (like furniture and appliances) remain low, while intentions to spend on services have increased, especially in dining and streaming. Conversely, plans for travel and movies diminished, but intentions for personal care and healthcare spending rose.

Political Factors and Tariff Impact

In December, consumers showed increased concern about political issues, particularly relating to the impact of November's election results, with a significant rise in mentions of tariffs. A special survey indicated that 46% of consumers believe tariffs will raise living costs, while 21% believe they could create more jobs.

Specific Data on Current Situation and Expectations

The current situation index shows a deterioration in consumers' assessment of present business conditions, with only 19.1% of consumers considering business conditions "good," down from 21.6% in November; meanwhile, those seeing business conditions as "bad" rose from 15.3% to 16.7%. In the labor market, 37.0% of consumers perceive jobs as "plentiful," up from 33.6% in November, while those finding jobs "hard to get" decreased from 15.2% to 14.8%.

The expectations index is more pessimistic, with only 21.7% of consumers expecting business conditions to improve, down from 24.7% in November; those expecting them to worsen rose from 15.9% to 18.3%. Expectations for future employment and income are equally weak, with the percentage anticipating more jobs falling from 22.8% to 19.1%, while those expecting fewer jobs rose from 17.9% to 21.3%; the proportion expecting income to rise fell from 20.7% to 17.2%, while those expecting a decrease rose from 12.1% to 14.3%.

Economic Outlook

The December consumer confidence data signals a slowing economic growth, particularly with the expectations index nearing the recession warning level, indicating uncertainty about the future economic outlook. Although inflation expectations have stabilized, the divergence in spending intentions reflects varying pressure on household finances. As the new year begins, it is crucial for the market to closely monitor changes in consumer confidence and the key factors that may influence economic recovery.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.