Consumer Confidence Softened in January

The Consumer Confidence Index from The Conference Board fell in January but remains at a historically favorable level overall. The composite index decreased 1.4 points or 1.2 percent to 113.8 (see first chart). From a year ago, the index is up 30.7 percent.

The decline in the composite index was driven by the expectations component. The expectations component lost 4.6 points, taking it to 90.8 while the present-situation component increased 3.4 points to 148.2 (see first chart). The total index and both components remain well above typical recession lows but also remain somewhat below record highs.

Within the expectations index, expected business conditions, employment conditions, and expected income all fell slightly though buying plans for autos, homes, and major appliances all ticked up slightly.  For the present situation index, current business conditions improved while employment conditions weakened slightly.

Inflation expectations fell to 6.8 percent in January, down from 6.9 in December and a recent high of 7.3 percent in November; expectations were 4.4 percent in January 2020 (see second chart). The modest easing in consumers’ inflation expectations are consistent with the moderate easing in price increases for gasoline and grocery prices, two of the most frequently purchased items for consumers (see second chart).

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