The confidence of U.S. consumers unexpected rose in January as expectations for the economy and the labor market improved even as current conditions were seen as worsening.
Data from the Conference Board released Tuesday showed the index of consumer confidence rising to 89.3 from 87.1 in December.
The improvement came from the forward-looking component of the index. The Present Situation Index–based on consumers’ assessment of current business and labor market conditions–fell 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.
“Consumers’ appraisal of present-day conditions weakened further in January, with COVID-19 still the major suppressor,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ expectations for the economy and jobs, however, advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future. 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.”
This is the first improvement in the Conference Board’s index after two consecutive monthly declines.
Americans are increasingly divided about the economy. The share of consumers saying business conditions are bad rose from 39.7 percent to 42.8 percent. At the same time, the share saying conditions are good inched up four-tenths of a percentage point to 15.8. The percentage of consumers expecting business conditions will improve over the next six months increased from 29.5 percent to 33.7 percent, while those expecting business conditions will worsen decreased from 22.0 percent to 18.1 percent.