US consumer confidence retreats as future outlook darkens

Consumer sentiment in the US unexpectedly declined in December, pulling back after strong gains over the previous two months as concerns about the future outlook returned.

The Conference Board's closely followed consumer confidence index fell to 104.7 this month from 112.8 in November, surprising analysts who had forecast a small improvement to 112.9.

This was the first decline in three months and followed a jump of 13.6 points over the previous two months combined, sending the index to its highest level since July 2023 and the second-highest mark since late-2021.

This was mainly due to the initial euphoria surrounding the US presidential elections, with stock markets hitting new highs while economic data continued to improve.

However, for December, the present situation index declined 1.2 points to 140.2, while the expectations index tumbled 12.6 points to 81.1, marginally above the 80-point threshold which usually signals a recession ahead, the Conference Board said.

Dana Peterson, chief economist at the research group, noted that the headline sentiment index fell back to the middle of the range that has prevailed over the past two years.

While views of current labour market conditions continued to improve – aligning with recent jobs and unemployment data – people's assessment of business conditions weakened.

Notably, mentions in the survey of tariffs increased this month, with 46% of those questioned expecting tariffs to raise the cost of living – though 21% said they expected tariffs to create more US jobs.

"Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes. Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November," Peterson said.