U.S. Consumer Confidence Halts Three-Month Uptrend in December Amid Tariff Concerns

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The U.S. Conference Board consumer confidence halted its three-month uptrend due to uncertainties surrounding President Trump’s policies, According to the Conference Board on December 23.

The Consumer Confidence Index (CCI) for December stood at 104.7, a decline of 8.1 points from the previous month and significantly below market expectations of 112.9. The Present Situation Index, which measures current business conditions and the labor market, edged slightly lower to 140.2 (prior: 141.4). Meanwhile, the Expectations Index, reflecting short-term outlooks, fell sharply to 81.1 (prior: 93.7).

The report indicated that although consumers showed optimism regarding recent and future labor market conditions, their expectations for business conditions and income growth deteriorated significantly.

This decline largely reflects concerns that Trump’s future tariff policies could raise living costs. Written responses from consumers showed that mentions of “politics” and “tariffs” increased in December compared to November. Notably, 46% of consumers anticipated that tariff policies would increase their living costs, while 21% believed the policies could create more jobs in the U.S.

In terms of household spending plans, despite the Federal Reserve initiating a rate-cut cycle in September, the 30-year fixed mortgage rate remains near a 20-year high. As a result, plans to purchase homes declined slightly in December. However, car-buying plans continued to increase, driven by recent dealer discounts, tariff concerns, and the elimination of electric vehicle subsidies, which boosted automotive demand.

Separately, the University of Michigan’s Consumer Sentiment Index showed confidence rising for the fifth consecutive month, though the increase was attributed to strong present situation data, while the expectations component declined.

The survey revealed that consumers widely expect living costs to rise, with one-year inflation expectations climbing from 2.6% in November to 2.8% in December. Additionally, a growing proportion of consumers indicated they would purchase durable goods now to avoid future price increases driven by tariff policies.

From a partisan perspective, Republican supporters remained optimistic about future prospects, while confidence among Democrats further deteriorated. Neutral respondents showed expectations for personal finances and business conditions remained unchanged from the previous month.

Overall, December’s consumer confidence data highlights the pressures stemming from policy uncertainty, particularly concerns about tariffs potentially raising future living costs. While some consumers have accelerated durable goods purchases to hedge against anticipated price increases, this behavior could dampen durable goods consumption next year and further constrain business investment spending.