US: Consumers’ expectations higher in January - Wells Fargo

According to analysts from Wells Fargo, US consumer confidence recovered in January as uncertainty about tax cuts subsided. They noted that consumers are confident in the job market, and expect the stock market to keep rising. 

Key Quotes: 

“The Consumer Confidence Index rose further than expected January. The headline came in at 125.4 in January, the third-highest of the cycle, behind November and October of 2017. The Conference Board’s headline gauge had dipped in December, possibly on uncertainty about the specifics of tax reform.”

“Consumers’ assessment of the present situation slipped slightly in January, to 155.3 from 156.5 in December. While the dip resulted from a slightly less positive assessment of current business conditions, the percent responding business conditions are ‘bad’ remains is near its cycle low. The index for the present situation remains very elevated.”

“The strong job market is certainly a key factor in consumers’ continued confidence. Some of the largest improvements over the past year have come from a rising share of respondents that believe jobs are plentiful.”

“The share of respondents that expected the stock market to go higher over the next six months skyrocketed to 51.6 percent in January. This is an all time high for the series dating back to 1987. This would not be the first time that stock market turned down on the very day we get confirmation that main-street America is buying into the market’s strength.”

“The share of consumers expecting higher interest rates also rose in January. That may have played a part in the drop in the share that plan to buy a home in the ext six months. The share planning to buy a new automobile rose slightly. Plans for major purchases came down after surging in November and December.”