U.S. consumer confidence slumped in December to the lowest since July as a gauge of labor market expectations fell by the most in 41 years, the latest sign Americans are growing less optimistic as stock markets gyrate and the expansion moderates.
The confidence index decreased to 128.1 from 136.4, according to a report Dec. 27 from the New York-based Conference Board. That missed every economist estimate in Bloomberg’s survey, which called for 133.5. A measure of consumer expectations fell to a two-year low while the share of people expecting more jobs in the next six months decreased to 16.6% from 22.7%, the biggest drop since 1977.
“Back-to-back declines in expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement released with the data.
Despite the steep fall in employment expectations, consumer perceptions about the current state of the job market remain upbeat. The labor differential, measuring the gap between respondents saying jobs are plentiful and those saying jobs are hard to get, climbed to the highest since 2001.
Optimism, which recently reached an 18-year high, is slipping after months of rising uncertainty about the trade war and President Donald Trump’s attacks on the Federal Reserve, which have whipsawed financial markets. That’s been accompanied by a weakening economic outlook for next year amid fresh signs that the U.S. housing market is cooling and the manufacturing sector is starting to falter.
Another weak spot was household plans to spend on big-ticket items. Measures of the share of consumers who plan to buy cars, homes and major appliances such as refrigerators in the next six months all declined.
The drop in confidence “is not a disaster, as the level of the headline gauge is merely back to near where it spent the first seven months of this year,” Stephen Stanley, chief economist at Amherst Pierpont Securities, wrote in a note. “However, it will definitely be worthwhile to keep a close eye on the various measures of consumer attitudes over the next few months to get a feel for whether and how the dive in stock prices might be affecting consumers’ collective psyche.”
The Bloomberg Consumer Comfort Index’s monthly expectations gauge fell to a one-year low in December as more respondents said the economy is getting worse. Meanwhile, the weekly comfort measure, released earlier Dec. 27, rebounded somewhat from a three-month low.