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Easing Inflation Improved Consumer Confidence in December

Affordability

Easing Inflation Improved Consumer Confidence in December

Why buyers relieved by lowering prices could still face headwinds from more inflation in 2022


January 6, 2022
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After hitting a 13-year high, easing inflation in December boosted consumer confidence and caused an increase in spending intentions for homes, cars, and other expenses which remained out of reach for many buyers throughout 2021. The Consumer Confidence Index rose to its highest level since July at 115.8 points in December, up 3.9 points from 111.9, though affordability will likely fluctuate into the new year with sustained high prices, the looming threat of the Omicron surge, and a reduced fiscal stimulus in 2022, reports the NAHB’s Eye on Housing.

Consumers’ assessment of current business conditions improved in December. The shares of respondents rating business conditions “good” rose by 2.0 percentage points to 19.9%, while those claiming business conditions “bad” fell by 0.5 percentage points to 26.8%. Meanwhile, consumers’ assessment of the labor market was less favorable. The share of respondents reporting that jobs were “plentiful” decreased by 0.4 percentage points, while those who saw jobs as “hard to get” rose by 1.7 percentage points.

Consumers were more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve increased from 25.6% to 26.7%, while those expecting business conditions to deteriorate declined from 19.6% to 17.9%. Similarly, expectations of employment over the next six months were more favorable. The share of respondents expecting “more jobs” rose by 2.3 percentage points to 25.1%, while those anticipating “fewer jobs” fell by 4.2 percentage points to 14.8%.

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