Consumer confidence in the U.S. unexpectedly declined in January, a sign spending may take time to accelerate early this year.
The Thomson Reuters/University of Michigan preliminary index of sentiment fell to 80.4 from 82.5 in December. Economists in a Bloomberg survey called for a reading of 83.5, according to the median estimate.
The report follows figures last week showing employment rose in December at the slowest pace in almost three years. While more job opportunities would help lift spirits, higher property values and rising equity prices are boosting household wealth and will keep consumers spending.
“There probably are some people who could have lost confidence based on what they read but I think the bigger driver is what people see day to day,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said before the report.
Estimates of the 67 economists in the Bloomberg survey ranged from 78 to 88. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that ensued.
The Michigan sentiment survey’s current conditions index, which measures Americans’ view of their personal finances, fell to 95.2 in January from 98.6 a month earlier.
The index of expectations six months from now decreased to 70.9 from 72.1 last month.
Today’s Michigan survey figures are consistent with another confidence measure. The Bloomberg Consumer Comfort Index for the week ended Jan. 12 fell to its lowest since the end of November.
Progress in the labor market paused last month. Employment in December rose by 74,000, the smallest gain since January 2011, following a 241,000 advance the prior month, a Labor Department report showed on Jan. 10. The unemployment rate dropped to 6.7%, the lowest since October 2008, as more people left the labor force.
“There are a number of factors impacting an already fragile consumer sentiment including government gridlock, various concerns about health care,” W. Rodney McMullen, chief executive officer of Cincinnati-based grocery chain Kroger Co., said on a Dec. 5 earnings call.
Rising mortgage rates and advances in home prices may be leading to caution among prospective homebuyers, which may prove temporary, according to Jeffrey Mezger, chief executive officer of homebuilder KB Home in Los Angeles.
“During the last half of the year, higher mortgage rates, higher home prices and lower consumer confidence due to uncertainty in Washington triggered a pause among homebuyers who are now being more cautious as they consider their purchase,” he said during a Dec. 19 earnings call.