The CB consumer confidence index rose in November to 111.7 (1985=100), up 2.1 points from 109.6 in October. The current situation index – based on consumers’ assessment of current working conditions and labor market – rose by 4.8 points to 140.9. The forecast index – based on short-term consumer expectations for income, business and labor market conditions – rose 0.4 points to 92.3, well above the 80 threshold that usually signals a coming recession. The deadline for preliminary results was November 18, 2024.
Dana M. Peterson, chief economist at the Conference Council, said: “Consumer confidence continued to improve in November and reached the top of the range that prevailed over the past two years.” November’s rally was mainly driven by more positive consumer assessments of the current situation, especially in relation to the labor market. Compared to October, Consumers were significantly more optimistic about future job availability, which hit its highest level in nearly three years.
Among age groups, November’s gains were driven by a significant jump in consumer confidence under the age of 35. Meanwhile, confidence among consumers aged 35 to 54 fell slightly after rising last month. All income groups reported higher confidence except those at the highest income levels (earning more than $125K) and the lowest (earning less than $15K). On a six-month moving average basis, homeowners under the age of 35 and those earning more than $100,000 remained the most confident.
Peterson added: “The percentage of consumers expecting a recession over the next twelve months fell further in November and was the lowest since we first asked the question in July 2022. Consumer assessments of their households’ current financial situation fell slightly, but optimism about their finances over the next six months reached a new high.
Consumer optimism on equities and low inflation
Consumers are becoming more optimistic about the stock market: 56.4% of consumers expected stock prices to rise over the next year, another record for this measure. Only 21.3% predicted a decline in stock prices. The share of consumers expecting higher interest rates over the next twelve months fell to 43.6%. The share of those expecting lower interest rates rose to 34.6%, the highest level since April 2020.
Meanwhile, the 12-month average inflation forecast fell from 5.3% last month to 4.9% in November, the lowest level since March 2020. In addition, references to inflation and prices in written responses decreased, as attention and focus shifted to the November elections in the United States. However, high prices remain in the forefront: in a special question about fears and hopes for 2025, consumers overwhelmingly chose higher prices as their first concern and lower prices as their first New Year’s wish; this was true in all income and age groups.
The same question found that high taxes, wars, conflicts and social unrest are other major – albeit less acute – concerns for consumers. Meanwhile, household finances completed the top of consumers’ wish list for 2025, including the ability to save more money, pay less taxes, and pay off debt.
On a six-month moving average, home purchase plans stalled in November, while car plans rose slightly. When asked about plans to buy more durable goods or services over the next six months, consumers continued to express a slightly greater preference for buying goods. In addition, more consumers expressed uncertainty about future purchases. Consumer purchase plans for most devices and electronics have declined. In terms of services, consumers’ priorities haven’t changed much, but they plan to spend slightly less in most categories in the future, with the exception of travel and healthcare.
What influence do you think CB consumer confidence has on government or FED policy decisions?
Consumer confidence plays an important role in shaping government and Federal Reserve policy decisions. Here are some of the main influences:
- Monetary Policy Adjustments
Interest rates: High consumer confidence could prompt the Federal Reserve to consider tightening monetary policy by raising interest rates to prevent the economy from warming up. Conversely, low confidence may prompt the Fed to cut prices to stimulate spending and investment.
Inflation considerations: When consumer confidence is high, increased spending can lead to inflationary pressures. The Federal Reserve monitors confidence levels to assess an appropriate monetary response.
- Fiscal Policy Decisions
Government spending: Policymakers may adjust fiscal policies based on consumer confidence. For example, if confidence is low, the government may increase spending or implement stimulus measures to boost economic activity.
Tax policies: Positive consumer sentiment can lead to discussions about tax cuts, as increased consumer spending can signal a strong economy.
- Economic forecasting
Consumer confidence is a key indicator in economic forecasting. It is used by policymakers to gauge the likely direction of the economy, which can affect budget planning and resource allocation.
- Regulatory changes
A strong consumer confidence index may encourage the government to pursue regulatory changes that promote business growth, while lower confidence may lead to increased scrutiny of economic policies to protect consumers.
- General Communication
The Fed and government officials often use consumer trust as a communication tool. They may refer to levels of trust in speeches and reports to explain or justify their policy decisions, with the aim of guiding public expectations.
In general, consumer confidence acts as a measure of economic health and influences decision-making at the Fed and government levels. Policymakers are closely monitoring this indicator to formulate responses that support economic stability and growth.
