Tax cuts appeared to buoy consumer confidence in early January, but concern over rising fuel and food costs and flat wages could undermine confidence going forward, according to the Thomson Reuters University of Michigan Surveys of Consumers released Friday.
“Consumers have become increasingly concerned with rising food and fuel prices, and have noticed that fewer and smaller discounts are now available at stores and vehicle dealerships,” noted Richard Curtin, chief economist for the survey. “If rising global demand puts continued upward pressure on prices, inflation is likely to be the source of considerable discontent among consumers. Given that consumers do not anticipate renewed wage growth, they are likely to again engage in selective spending cutbacks. Consumers are now less able to smooth consumption by using credit cards since fewer households now have credit cards and those that have them are likely to have lower credit limits.”
The Univ. of Michigan index showed consumer confidence dipping slightly as a decline in confidence about current conditions overwhelmed rising expectations about the future. That diverged somewhat from Gallup’s Economic Confidence Index, which found consumer confidence improved considerably during the week of Jan. 9 from December as fewer Americans described current economic conditions as poor and future economic conditions getting worse.
Gallup’s Economic Confidence Index found that while consumer confidence increased across the board in the first week of January, there was proportionately greater improvement among upper-income consumers (>$90k/year), than among middle- and lower-income consumers, who remained significantly less optimistic.
