Consumer Confidence Index Falls Sharply

In its least optimistic showing since July, the consumer confidence index fell a sharp 8.3 points to a 128.1 December level that is several points below Econoday's consensus range. The good news in the report is a further and sharp decline in those saying jobs are currently "hard to get", down 1 percentage point to a very low 11.6 percent reading that, like this morning's jobless claims data, should confirm expectations for strength in the December employment report.

The weakness in today's confidence report is not in current conditions but, for a second straight month, in expectations where job prospects and the outlook for business conditions have been eroding. Those expecting more jobs in the months ahead decreased sharply from 22.7 percent to 16.6 percent while those anticipating fewer jobs increased from 11.2 percent to 14.4 percent.

Trouble for the outlook is also hinted at by 6-month buying plans which are down for vehicles (12.7 vs 13.8 percent), homes (6.0 vs 6.4 percent) and very noticeably for appliances (47.7 vs 54.8 percent). The latter two readings are not positive indications for future residential investment.

The stock market doesn't carry great weight in this report which focuses mostly on the perceived health of the labor market. And despite this month's poor performance for stocks, the percentage of bulls actually rose 1.5 percentage points to 37.1 percent. The percentage of bears, however, also rose, up 3.7 points to 31.2 percent.

Much like this report, the current conditions component in the consumer sentiment report also showed strength in contrast to expectations. But this is still good news not only for immediate employment data but also for how strong holiday spending will prove. Yet for the initial outlook for the first-half of 2019, the weakening in expectations is hinting at a slowing for economic growth.

Other readings in today's report include a sharp 4 tenths downtick in 12-month inflation expectations to a 4.3 percent level which is very low for this report. This may well catch the eye of Federal Reserve policy makers who, in an effort to stem the risk of inflation, are planning on a couple of more rate hikes next year. For the record, the present situation index for December fell 1.1 points to 171.6 with expectations down a very sharp 13.2 points to 112.3.