Feeling good about the rate of change, still stressed by the price level

The December preliminary UoM consumer confidence index jumped to 69.4 from 61.3 and that was much better than the estimate of 62 and likely helped by the drop in one yr inflation expectations as the price of gasoline and other items are cheaper. Both Current Conditions and Expectations were higher m/o/m. One yr inflation expectations at 3.1% vs 4.5% in the month before is the least since March 2021. The 5-10 yr inflation guess was 2.8% vs 3.2% in November. This helped to lift the median percentage of those that expect family income to exceed inflation in the coming 5 yrs to 36.5% from 33.8%. It did touch 36.7% back in July.

Expectations for employment in the coming year fell 1 pt to 78 and continues to hover around the lowest since 2011. It stood at 105 in January 2020. The net income component was unchanged m/o/m.

On the gasoline side, this component fell to the lowest since September 2022, and of course a main driver in the drop in expectations for inflation. There also more people are expecting lower interest rates as they see the recent move over the past month.

Spending intentions improved with a 7 pt rise in those that think it’s a good time to buy a vehicle. After falling 10 pts last month, intentions to buy a major household item rose by 12 pts. Intentions for home buying were up 3 pts but fell by 10 in November. The UoM said “Concerns over high prices of durable goods and vehicles waned modestly.”