The latest numbers show that consumer confidence surged to a two-year high of 114.8 in January, indicating a slowdown in inflation, a record-breaking stock market, and improved economic growth. This increase from the revised 108.0 in December was reported by the Conference Board on Tuesday. According to a survey conducted by the Wall Street Journal, economists had anticipated the index to reach 115.0.
The last time the index was higher was in December 2021. Consumer confidence is typically an indicator of whether the economy is improving or worsening. Another similar survey, consumer sentiment, also rose to its highest level since the summer of 2021. However, both indexes are still lower than their pre-pandemic peak. Key details: A measure assessing how consumers perceive the current state of the economy escalated to 161.3 from 147.2 in the preceding month – the strongest reading since the month just before the onset of the pandemic in March 2020. Meanwhile, a confidence gauge predicting sentiment six months ahead rose to 83.8 from 81.9 in the prior month. Big picture: The economic outlook seems to be growing more positive. Inflation is decelerating and reverting to levels seen before the pandemic. Additionally, the unemployment rate remains very low, giving Americans the confidence to continue spending. Moreover, the next action expected from the Federal Reserve with respect to interest rates is a decrease, which should facilitate home purchases for individuals and borrowing for businesses. The first rate reduction is likely to occur in the spring or early summer. Looking ahead: Dana Peterson, chief economist at the board, stated, “January’s increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead, and generally favorable employment conditions as companies continue to hoard labor.” Market response: On Tuesday, the Dow Jones Industrial Average
DJIA,
-0.01%
and the S&P 500
SPX,
-0.11%
experienced slight declines.
