The consumer confidence index of Americans rose in January to 114.8 from a revised 108.0 in December, the report said.
The result was the highest since December 2021 and marked the third consecutive monthly increase, the report added.
The Current Situation Index, based on consumers’ assessments of the current business and labor market conditions, rose to 161.3 from 147.2 last month.
In addition, the Expectation Index, based on consumers’ near-term outlook for income, business, and labor market conditions, improved to 83.8 in January from a revised reading of 81.9 in December.
“The improvement in consumer confidence in January likely reflects slower inflation, the expectation of lower interest rates in the future, and generally favorable employment conditions as companies continue to hire workers. ,” he said. Dana Peterson, chief economist at The Conference Board.
On the other hand, Peterson clarified that the increase was observed in all age groups, but most among consumers aged 55 and over.
Likewise, confidence improved in all but the highest income groups. Only households with incomes above $125,000 experienced a slight decrease, the board explained.
On the other hand, written responses from January revealed that consumers remain concerned about rising prices, although inflation expectations fell to their lowest level in three years. Purchase plans eased in January, but consumers continue to rate their income and personal finances favorably now and over the next six months.
“Consumers’ perceived probability of a US recession in the next 12 months continued to decline slowly in January, consistent with an Expectations Index above 80,” he concluded.
Assessments of the current situation rose in January, driven by more positive views of business conditions and the employment situation. Furthermore, when asked to rate their current family financial situation (a measure not included in the calculation of the Current Situation Index), the proportion of those who said “good” increased, while that of those who said “”bad” decreased. “This suggests that consumers are starting the year in good spirits about their current finances,” Peterson said.
Besides, consumer expectations for the next six months rose slightly in January due to reduced pessimism about future business conditions, the labor market, and income prospects.
Expectations that interest rates would rise next year dropped to just 41.5%. Consumers who expect stock prices to rise in the coming year retreated slightly after rising in December but remained near three-year highs.
Average 12-month inflation expectations fell to 5.2%, the lowest level since March 2020 (4.5%).