US: Consumers remain optimistic going into the New Year - Wells Fargo

According to analysts from Wells Fargo, uncertainty surrounding the ultimate composition of tax reform weighed on consumer confidence in December but they see that consumers remain optimistic going into the New Year.

Key Quotes: 

“The Consumer Confidence Index declined a larger-than-expected 6.5 points in December to 122.1. All of the drop occurred in the expectations component, which likely signals concerns about what the ultimate composition of tax reform was going to look like and how that would impact the economy and household finances. The cutoff date for the Conference Board’s survey was December 15 and the tax reform package was still very much in flux throughout the forecast period.”

“While the drop in expectations is noteworthy, it may not be all that meaningful. Expectations are extremely volatile and have rarely risen much higher than they were in November. Even at their lower December level, expectations for future business conditions remain relatively high.”

“The proportion of consumers stating that jobs are plentiful is also more than twice as large as those stating that jobs are hard to get. The labor differential, which takes the difference between those two series, fell slightly in December but remains well above its year-ago level and is consistent with solid job growth and continued declines in the unemployment rate.”

“The proportion of consumers stating they plan to purchase a home in the next six months rose 1.1 percentage points in December and is currently at its highest level of this expansion. Plans to purchase an automobile slipped somewhat but remain at a relative higher level. Overall buying plans rose 5 points in December and are up nearly 10 points over the past two months. The surge in buying plans coincided with the strong holiday season. The bottom line is that consumers remain optimistic going into the New Year, even though the headline consumer confidence figure fell in December.”