William Blair mpany : Consumer Confidence Improves in January

Consumer confidence rose in January to 98.1, versus an expected unchanged reading of 96.5. The change was driven by a rise in the expectations component, whereas the present situation assessment was unchanged. Though the present situation assessment is still high relative to history.

The flat reading in the present situation was due to flattish readings for sentiment toward business conditions; however, consumers' views on the current employment were lower, and those who found 'jobs plentiful' decreased to 22.8% from 24.2%. Those who found 'jobs hard to get' decreased to 23.4% from 24.5%. With regard to consumers' expectations, sentiment toward viewing business conditions as 'better' was higher at 16.2%, and expectations for 'more jobs' were also higher at 13.2% from 12.4%. Those anticipating higher incomes also increased to 18.1% from 16.3% in December, but those who expected a decrease in income also rose slightly to 10.8% from 9.5%. The percentage of respondents planning to buy a home was much higher at 6.6% (highest since July 2013). Plans to purchase a new home were lower at 0.7%.

This report was a little stronger than had been expected, showing that consumers have (so far) been unphased by the volatility in the financial markets. And while they were a little more wary about conditions in the labour market, on the whole they still believe conditions are good. Looking at the slightly bigger picture, the downward trend in aggregate expectations from about the middle of last year, however, has not been broken; while there was a bounce this month, if market volatility continues it seems likely that expectations will take another step down. One major component of this, the important income expectations index, seems to be stalling out and will need close monitoring. Net-net, consumers are still holding up well, but not expecting economic growth to do much from here.

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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.