Consumer confidence rises to highest since April as gas prices fall

Consumer confidence bounced back in December to the highest level since April, reversing consecutive declines in October and November as Americans grew more upbeat on the economy and jobs.The Conference Board’s consumer confidence index stood at 108.3 in December, up from 101.4 the prior month, while consumers’ view on business conditions and the prospects for income both rose as well.Inflation expectations fell in December to their lowest level since last September, according to the Conference Board, as gas prices dropped.Gas prices have plunged nearly 40% to $3.11 Wednesday after hitting a record high in June, according to AAA. “Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus,” said Lynn Franco, senior director of economic indicators at The Conference. Board.”Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further. This shift in consumers’ preference fro m big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes.” Inflation expectations came down this month even as prices remain high for everything from groceries to haircuts – something the Federal Reserve is watching closely as the central bank tries to ward off higher inflation becoming entrenched in the minds of consumers. Longer-term inflation expectations haven’t leaped, though the Fed is watching this measure closely as high inflation persists. Consumer confidence and expectations for the economy have picked up in recent months, though still remain below pre-pandemic levels. (Source: The Conference Board) Though for the record the current level of the expectations index is consistent — based on the long-term relationship — with real consumption rising by about 2%,” Shepherdson wrote. “That’s in line with our 2023 forecast.”Story continuesStill, The Conference Board noted the current level of expectations remains near 80, a level associated with recession. Consumer confidence is looking up as Fed Chair Jerome Powell told reporters last week a soft landing — in which inflation slows but a recession is avoided — is still possible, though cautiously keeping interest rates higher for longer would lower the outcome for that scenario.” To the extent we need to keep rates higher and keep them there for longer and inflation moves up Higher and higher, I think that narrows the runway,” Powell said at a press conference earlier this month. “But lower inflation readings, if they persist in time, could certainly make it more possible.” Powell also said lowering inflation will likely require a sustained period of below-trend growth and deterioration in the job market, though stopped short of calling this expectation a recession forecast.Click here for the latest economic news and economic indicators to help you in your investing decisionsRead the latest financial and business news from Yahoo FinanceDownload the Yahoo Finance app for Apple or AndroidFollow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn , and YouTube

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