The Conference Board reported that its Consumer Confidence Index declined from 66.7 in December to 58.6 in January. This is its lowest level in 14 months, and it suggests that Americans ended 2012 and began 2013 on a more-negative note. Higher payroll taxes and continued fiscal uncertainties are more than likely behind this increase in pessimism.
The real worry will be how this will translate into spending patterns moving forward, with less disposable income probably lowering sales. As such, we will closely watch retail sales and personal spending numbers for January. (Personal income and spending data for December will be released on Thursday.) The National Retail Federation has already said that they expect lower retail sales in 2013, up just 3.4 percent this year instead of the estimated 4.2 percent rate in 2012.
Looking specifically at the Conference Board report, respondents were less optimistic about both the current and future economic environments. Individuals were less positive about employment and income expectations. For instance, 37.7 percent of them said that jobs were hard to get, up from 36.1 percent last month. This figure is still below the 41.0 percent rate observed six months ago, suggesting that these sentiments are relative. There has been some progress in the labor markets which continue to be reflected in this data.
Expected buying plans were mixed. There was a drop in the percentage of individuals saying that they planned to purchase a motor vehicle (from 12.2 percent to 10.1 percent); whereas, those intending to purchase a home were unchanged (5.3 percent) and the ones buying appliances rose (from 46.1 percent to 47.7 percent).
Chad Moutray is chief economist, National Association of Manufacturers.