Decline in U.S. Consumer Confidence Raises Recession Concerns Despite Economic Resilience

In December 2024, the Conference Board reported a decline in U.S. consumer confidence, with the index falling to 104.7 from November's 112.8, contrary to analysts' expectations of a rise to 113.8.

The consumer confidence index evaluates Americans' perceptions of current economic conditions and their outlook for the next six months. Notably, the measure of short-term expectations for income, business, and the job market dropped over twelve points to 81.1. The Conference Board indicates that a reading below 80 may signal a potential recession in the near future.

Despite the decline in confidence, consumer spending has shown resilience. Retail sales increased by 0.7% in November, suggesting that consumers continued to contribute positively to the economy during the holiday season. Additionally, the U.S. economy experienced a 3.1% annual growth rate in the last quarter, largely driven by consumer demand, which accounts for nearly 70% of U.S. economic activity.

The Conference Board's Leading Economic Index (LEI) has also been a focal point for assessing recession risks. In previous months, the LEI pointed to a deep recession with no sign of a fast rebound. However, as of February 2024, the Conference Board abandoned its long-running call for a U.S. recession, indicating a shift in economic outlook.

Economic forecasts for the U.S. have been adjusted accordingly. The Conference Board now anticipates the economy to expand at an upwardly revised pace of 2.7% year-over-year in 2024 and 2.0% in 2025. This suggests that while growth may slow compared to previous years, the economy is not expected to contract.

Despite these positive indicators, concerns remain. The decline in consumer confidence reflects apprehensions about inflation, interest rates, and potential economic slowdowns. The Federal Reserve's monetary policy decisions, aimed at controlling inflation, have led to higher borrowing costs, which could dampen consumer spending and business investments.

Moreover, global economic uncertainties, including geopolitical tensions and supply chain disruptions, continue to pose risks to the U.S. economy. Businesses and consumers alike are navigating these challenges, which could impact economic performance in the coming months.

In conclusion, while the recent decline in consumer confidence and the Conference Board's indicators suggest caution, the U.S. economy has demonstrated resilience through sustained consumer spending and GDP growth. Policymakers and economists will continue to monitor these trends closely to gauge the likelihood of a recession and to implement measures that support economic stability.