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First Cut: December Consumer Confidence Index declines sharply, but still strong

The Conference Board’s Consumer Confidence Index declined to 128.1 in December after 136.4 in November (previously 135.7). The decrease was mostly due to a sharp fall off in six-month expectations to 99.1 from 112.3 (previously 111.0). Confidence in the present situation was slightly lower at 171.6 in December from an unrevised 172.7 in the prior month.

The reading was the lowest since 127.9 in July. The index held at exceptional levels in the August to November period. The decline in December only brings the index down to a level of strong confidence and only indicates a more moderate sense of confidence, not a significant deterioration.

Nonetheless, the decline is likely to be a disappointment to markets as they get another piece of evidence that economic growth is seen as being slower in the year to come.

The composition of the change in the index reflects a sharp decline for expectations for employment and business conditions and to a lesser extent for gains in income. These are not for declines, just for a slower pace of increases. Present employment was a positive contribution that was more than offset by a dip in confidence in the present business situation.

More than anything else, the strength in the labor market is keeping confidence high in spite of some fluctuations in the outlook for business.

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