Consumer confidence increased slightly in January, despite the fact that cases of the coronavirus (COVID-19) are increasing and U.S. deaths from the pandemic surpassed 400,000 this month.
The Conference Board’s monthly Consumer Confidence Index rose to 89.3 this month after falling to 87.1 in December. Lynn Franco, senior director of Economic Indicators at The Conference Board, said the monthly survey shows consumers are well aware of the current challenges posed by the pandemic but are hopeful about the future.
"Consumers' expectations for the economy and jobs advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future,” she said. “In addition, the percent of consumers who said they intend to purchase a home in the next six months improved, suggesting that the pace of home sales should remain robust in early 2021."
But all of that optimism may be months away from being realized. The Present Situation Index – based on consumers' assessment of current business and labor market conditions – fell this month from 87.2 to 84.4. The Expectations Index – based on consumers' short-term outlook for income, business, and labor market conditions – increased from 87.0 in December to 92.5 this month.
For example, the percentage of consumers saying business conditions are "good" increased from 15.4 percent to 15.8 percent, but those claiming business conditions are "bad" also increased, from 39.7 percent to 42.8 percent.
Hopes for a better job market
With unemployment claims rising over the last month, consumers' assessment of the labor market was also less favorable. The percentage of consumers saying jobs are "plentiful" declined from 21.0 percent to 20.6 percent, while those claiming jobs are "hard to get" rose from 22.9 percent to 23.8 percent.
The bright spot in the survey is the short-term future. The percentage of consumers expecting business conditions to get better over the next six months rose from 29.5 percent to 33.7 percent. The percentage of consumers expecting business conditions will worsen decreased from 22.0 percent to 18.1 percent.
Even though the labor market appears to have gotten worse over the last four months, consumers expect that to get better as the coronavirus vaccine becomes more widely distributed. The percentage of consumers expecting a better job market in the next six months rose from 28 percent in December to 31.3 percent this month.