Welcome to 2023 where we have some hopeful news. In December, consumer confidence rose to its highest level since April, after falling for two months in a row in October and November.
Most likely, it’s the drop in gas prices in the US that helped along the uptick in consumer confidence. AAA says that since June, when gas prices hit a record high, they have dropped nearly 40% to $3.11 on Wednesday.
Lynn Franco, senior director of economic indicators at The Conference Board reported that plans to take vacations got better but plans to buy homes and big-ticket appliances got worse. This shift in consumers’ preferences from big-ticket items to services will continue in 2023. Basically, inflation and interest rate rises will continue to push consumers toward services in 2023.
The economic landscape in the US remains a mixed bag, though.
The Conference Board went on to highlight that consumer confidence index levels remained close to 80, a level linked with the recession.
Fed Chair Jerome Powell told reporters last week that a “soft landing” in which inflation slows but there is no recession is still possible. This is good news for consumer confidence, but Powell warned that keeping interest rates high for a longer time would make this scenario less likely.
Despite this uncertainty and the ever-present squeeze of inflation rates, the U.S. economy expanded by 3.2% in the third quarter, above expectations of 2.8%. Data released by the US Bureau of Economic Analysis showed that consumers increased their spending and firms spent more on capital like tools, machinery, and factories.
The report also confirmed that Real gross domestic product (GDP) increased in 47 states, and that personal income increased in all 50 states. These are all encouraging signs of economic health.
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