ANN ARBOR—Consumer confidence rebounded among households with incomes less than $75,000 in December, according to the Thomson Reuters/University of Michigan Surveys of Consumers. Conducted by the U-M Institute for Social Research (ISR) since 1946, the Surveys monitor consumer attitudes and expectations.
Higher income households reported the same-sized gains in the November survey. By mid December, no additional gains were reported by either group. While the end of the government shutdown did ease concerns about the economy, it did not generate any more confidence in the government's economic policies. Most of the gain reflected more favorable buying plans due to renewed discounting as well as more favorable short-term prospects for the economy. Buying attitudes toward homes, vehicles, and household durable goods all improved in December. Personal finances, the most critical factor that shapes consumer spending, did slightly improve in December, although largely due to rising values of homes and stock holdings among those in the top third of the income distribution.
“Consumers were clearly relieved when the D.C. gridlock ended,” said U-M economist Richard Curtin, director of the Surveys. “Confidence has bounced back to nearly the same levels it was before the crisis in mid-2013. Simply ending the shutdown or passing a new budget to keep the government open, however welcome, is not seen by consumers as a proactive step toward better economic policy.
While they anticipate the economy to improve and retailers to offer larger discounts, most consumers still anticipate tiny wage gains—gains that are even smaller than the currently low inflation rate. Consumers are not ready to celebrate, aside from those who have benefited from rising stock market wealth.”
Personal Finances Improve for Some
Personal finances improved among all households in the recent survey, although most of the gains occurred among those under age 45 and those in the top third of the income distribution. The largest differences were due to rising stock values, primarily held by top income households. Although these same age and income groups anticipated the largest gains in their nominal incomes during the year ahead, those increases were below the expected inflation rate. No group anticipated rising inflation-adjusted incomes during the year ahead.
Job Prospects Improve Due to Stronger Economy
When asked to identify recent trends, consumers reported more news of job gains, and anticipated that the national unemployment rate would decline in the year ahead. The expected declines were due to a strengthening economy in the year ahead, although over the longer term the economy was still seen as vulnerable to setbacks.
Consumer Sentiment Index
The Sentiment Index was 82.5 in December 2013, up from 75.1 in November and well above last December’s 72.9. The year-to-year gain was nearly equal for current economic assessments and future economic prospects. The Expectations Index rose to 72.1 in December, up 13.0% from last year, and the Current Conditions Index was 98.6 in December, up 13.3% from last December’s reading.
About the survey
The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95-percent level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6.0 points. For more information, visit the Surveys of Consumers website at http://press.sca.isr.umich.edu.
- Video about the Surveys of Consumers is available at http://youtu.be/JkQauI15hlE.
- Chart at http://bit.ly/1a3FT6C
- Table at http://bit.ly/1idNh7m
Established in 1949, the University of Michigan Institute for Social Research is the world's largest academic social science survey and research organization, and a world leader in developing and applying social science methodology, and in educating researchers and students from around the world. ISR conducts some of the most widely cited studies in the nation, including the Thomson Reuters/University of Michigan Surveys of Consumers, the American National Election Studies, the Monitoring the Future Study, the Panel Study of Income Dynamics, the Health and Retirement Study, the Columbia County Longitudinal Study and the National Survey of Black Americans. ISR researchers also collaborate with social scientists in more than 60 nations on the World Values Surveys and other projects, and the institute has established formal ties with universities in Poland, China and South Africa. ISR is also home to the Inter-University Consortium for Political and Social Research, the world's largest digital social science data archive. For more information, visit the ISR website at www.isr.umich.edu.
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. They combine industry expertise with innovative technology to deliver critical information to leading decisionmakers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to www.thomsonreuters.com.