Consumer confidence fell in December as the Conference Board Consumer Confidence Composite Index declined by 6.5 points to 122.1, well below analysts’ expectations. This was the largest monthly decline since 2015, but analysts caution that there is no cause for concern. Despite the decline, the index remains at levels not witnesses since the early 2000s. On a three month moving average, (3MMA) the composite index measured 125.6, up 0.5 point month on month (m/m). On a year over year comparison, the composite index was up 8.4 points or 7.4%.

The Consumer Confidence Survey measures the level of confidence individual households have in the performance of the economy. Survey asks a nationwide representative sample of 5,000 households, of which approximately 3,500 responses. Households are asked five questions that include (1) a rating of business conditions in the household’s area, (2) a rating of business conditions in six months, (3) job availability in the area, (4) job availability in six months, and (5) family income in six months that go into the top line index.

Figure 1 shows the Composite, Present and Expectation indexes from 2005 to present. The Present Situation score was up 1.7 points month on month, (m/m) to 156.6. The Present situation index continues to climb into record territory, rising 24%, 3MMA y/y. The present situation scored the highest result since July 2001. The Expectation on the other hand, tumbled 11.9 points m/m to 99.1, its lowest reading since June. Looked at on a 3MMA y/y basis, the expectation index was up 12%

Figure 2 chart two sub-indexes, 1] Employment – jobs plentiful, (blue-line) and 2] Expected income – increase, (green-line). The 3MMA jobs plentiful index gained 1.0 point m/m to 36.6%. Those who saw jobs harder to get, (3MMA) fell 0.9 point to 16.4%. The expectation of higher wages index moved-up 0.6 to 20.9%, while those expecting an income decrease, rose 0.1 points to 8.0%. Wage increases have been stubborn thus far in the recovery keeping a lid on inflationary pressures.

Inflation expectation at the consumer level gained 0.3% y/y to 4.8% this month. Both consumers and business confidence remains high. Economic data continues to be solid with an economy at full employment.

At Gerdau we routinely monitor consumer confidence, readily available credit and spending habits since we know that increased consumer spending translates to stronger steel sales and vice versa.