January Consumer Confidence Research Notes

by Jim Baird on January 31, 2012

Confidence wanes as stagnant income growth weighs on consumers

The improvement in economic data leading up to the end of the year has turned softer in recent weeks, and today’s indication that consumer confidence fell unexpectedly in January is no exception.

While optimism about the jobs market had been slowly building as the jobless rate fell late last year, persistently stagnant income growth has been disheartening to consumers. 

The recent increase in gasoline prices has also cast a shadow over consumer mood, which doesn’t bode well for spending.

Early in the holiday shopping season, there was a sense that consumers were spending a bit more briskly than in prior years.  Increasingly, it appears that the spending cycle may have just started a bit earlier as retailers used aggressive discounts to get shoppers into the stores early to capture market share and spending increases may have been modest.  As last week’s GDP report illustrated, consumer spending was up for the quarter, but only to a limited degree.

All things considered, this persistent malaise that has defined the environment for consumers over the past few years shows little sign of easing in the near-term.  Households remain concerned about the slow improvement in the jobs market, the continued stagnation in the housing market, the need to reduce indebtedness, and limited earnings growth.  With the outlook for the economy still lackluster at best, it will take some time for the healing process to play itself out.

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