Confidence among U.S. consumers rose to its highest level in five months as Americans brushed off concerns about inflation and the spread of Omicron, though both factors loom large as headwinds for sentiment going forward.
"Concerns about inflation declined after hitting a 13-year high last month as did concerns about COVID-19, despite reports of continued price increases and the emergence of the Omicron variant," Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement.
Consumer price inflation hit 6.8 percent in the year through November, a 31-year high. Rising prices have become a key worry among U.S. consumers, more so than unemployment, according to Richard Curtin, director of the University of Michigan’s closely watched Consumer Sentiment Index, a separate confidence measure.
The Conference Board's present situation index, a gauge of current business and labor market conditions, edged down to 144.1 in December from 144.4 in the prior month.
"The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021," Franco said.
The expectations index, which measures consumers' six-months-ahead outlook for income, business, and labor market conditions, jumped to 96.9 from 90.2.
Franco said there was an increase in the proportion of consumers planning to buy homes, cars, and major appliances over the next six months, setting the stage for more economic growth early next year. Headwinds to the future outlook remain, however, with a rise in COVID-19 infections having the potential to dampen economic activity in the first quarter.
"Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic," Franco said.
Lawrence Yun, NAR’s chief economist, predicted that house prices will continue to climb in 2022, though at a slower pace.