By Xavier Fontdegloria
Consumer confidence in the U.S. deteriorated slightly at the beginning of the year as the increase in Covid-19 cases due to the spread of the Omicron variant and broad inflation pressures dimmed the outlook for the economy.
The Conference Board's consumer confidence index decreased to 113.8 in January from a revised 115.2 in December, data released Tuesday showed. The decline in confidence follows three consecutive months of gains.
Economists polled by The Wall Street Journal had forecast the index--which is based on an online survey of consumers--to decline to 111.7.
Consumers turned slightly more pessimistic as their short-term expectations weakened, pointing to a likely moderation in economic growth during the first quarter of 2022, said Lynn Franco, The Conference Board's senior director of economic indicators.
The expectations index--which gauges short-term outlook for income, business and labor-market conditions--fell to 90.8 from 95.4, the report said.
However, the present situation index, which reflects consumers' assessment of current business and labor-market conditions, increased to 148.2 in January from 144.8 the prior month. The measure suggests that the economy entered the new year on solid footing, Ms. Franco said.
Consumer confidence hints at Americans' willingness to spend on goods and services, a major driver of the U.S. economy. However, the correlation between confidence and spending has weakened during the Covid-19 pandemic as stimulus spurred households to keep buying, economists say.
"Consumers are still spending even though consumer confidence may suggest otherwise," Affinity Solutions Chief Executive Jonathan Silver said. Data from the firm, which monitors credit and debit card transactions, show that spending in December increased 16.5% on year.
The Conference Board's survey for January showed that the proportion of consumers planning to purchase homes, automobiles and major appliances over the next six months all increased.
Neither the Omicron variant nor high inflation appear to be causing a significant pullback in consumer spending, but inflation has the potential to slow momentum if left unchecked, Mr. Silver said.
Concerns about inflation declined somewhat but remained elevated, while fears due to the pandemic increased slightly amid the surge in Covid-19 cases over the month, The Conference Board said.
"Looking ahead, both confidence and consumer spending may continue to be challenged by rising prices and the ongoing pandemic," Ms. Franco said.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
01-25-22 1038ET
