Consumers’ assessment of the present economic situation held steady as inflation concerns declined from a recent 13-year high. Twelve-month expectations for inflation decreased to 6.9 percent in December, down from 7.3 percent in November.
As a result, plans for durable-goods purchases, such as cars and homes, increased in December. Consumers’ current assessment of the labor market held strong—with 42.6 percent more consumers seeing jobs as “plentiful” relative to those who saw them as “hard to get.” However, consumers’ expectations for future labor market conditions improved markedly, with 10.3 percent more consumers speculating there will be more jobs in the coming six months than those who believe there will be fewer.
This differential increased from 3.8 percent more in November and is a solid indication of confidence moving into 2022. The possibility of continued increases in gas prices may loom as a larger influence on consumer confidence in the coming months. With the potential for more consumers returning to commuting in 2022, gas purchases could once again become a larger portion of consumers’ budgets.
Additionally, with a survey cutoff date of December 16, the entire impact of the Omicron variant was still likely not captured in the initial December release. The path of the variant will also likely emerge as a key indicator of consumer confidence in the first several months of the new year. Should COVID cases and hospitalizations quickly dissipate, confidence could get a boost.