Consumer Sentiment: Modest Decline in Final Reading

Bottom Line: Consumer confidence slipped in the final reading for December from the University of Michigan but remained above November's reading. Politics remained a substantial influence on sentiment among consumers. The partisan divide that had Republican sentiment leading the overall sentiment index higher from late 2016 until early 2020 has flipped completely. Those who identify as Democrat now have more optimistic outlooks, while those who self-identify as Republican have lower expectations for future economic conditions. That combination was enough to propel the index for future conditions higher. The report also highlighted increased economic inequality in the wake of the pandemic. But even among the more favored households, consumers saw the vaccine rollout as still a distant aid to economic prospects. Consumer Sentiment was REVISED DOWN by 0.7 points in late December to 80.7%, compared with market expectations for a small decrease to 81.1%. Sentiment has improved by 0.3 points over the past 3 months. Compared to November's final level of 76.9%, with this month's modest increase, sentiment is 18.7% BELOW its year-ago level. Current Conditions were REVISED DOWN by 1.8 points to 90.0%. Current conditions are now 22.1% BELOW their year-ago level. Consumer Expectations were REVISED DOWN by 0.1 points to 74.6%. With this month's modest increase, compared to November's final level of 70.5%, expectations are 16.1% BELOW their year-ago level.