Prime Highlights: 

The U.S. consumer confidence index fell to 104.1 in January, down from 109.5 in December, marking a second consecutive month of decline. 

Consumers’ assessment of current economic conditions dropped significantly, falling 9.7 points to 134.3. Additionally, views on the labor market showed a decline for the first time since September. 

Key Background: 

U.S. consumer confidence has decreased for the second consecutive month, according to the latest report from the Conference Board. The consumer confidence index dropped to 104.1 in January, down from 109.5 in December. This result fell short of economists’ expectations, which had forecast a reading of 105.8. Despite a revision of December’s figure upward by 4.8 points, the overall trend reflects a decline from the previous months. 

The Conference Board’s consumer confidence index measures Americans’ views on current economic conditions as well as their outlook for the next six months. While consumers appeared confident towards the end of 2024, reflected in a strong holiday shopping season, the outlook for early 2025 has softened. In December, U.S. retail sales saw a modest increase of 0.4%, with stores reporting solid sales figures, even amidst rising borrowing costs. 

January’s survey showed a notable drop in consumers’ assessment of current conditions, which fell 9.7 points to 134.3. Additionally, consumer sentiment regarding the labor market saw its first decline since September. The outlook for income, business, and job prospects also weakened, with expectations dropping by 2.6 points to 83.9. A reading under 80 can indicate the potential for a recession in the near term. 

Despite the recent dip in confidence, many consumers remain optimistic, and spending continues to support the U.S. economy. Consumer expenditures have been a key driver in the post-pandemic economic recovery, helping to sustain economic growth. The U.S. economy expanded at an annual rate of 3.1% in the third quarter of 2024, with consumer spending and exports contributing to the robust performance. However, rising credit card balances and delinquencies, as reported by the Federal Reserve Bank of Philadelphia, could signal growing financial pressure on consumers. Despite this, the overall economic outlook remains positive, with consumer spending continuing to fuel growth in the early part of 2025.