Consumer confidence in the United States ticked up slightly in December, offering a glimmer of hope after months of deterioration. The University of Michigan's consumer sentiment index rose to 52.9 from 51.0 in November—still depressed by historical standards, but moving in the right direction.
The December Numbers
The final December reading came in slightly below the preliminary estimate of 53.3:
- Consumer Sentiment Index: 52.9 (up from 51.0 in November)
- Current Conditions: 50.4 (revised down from 50.7)
- Expectations: 54.6 (revised down from 55.0)
While the month-over-month improvement is welcome, the year-over-year picture remains concerning. December 2024's reading was 74.0—meaning sentiment has fallen 28.5% over the past twelve months.
Inflation Expectations Ease
The most encouraging detail in the report: inflation expectations continue to moderate.
Year-ahead inflation expectations: 4.2%, down for the fourth consecutive month and the lowest reading in 11 months. However, this remains above the 3.3% seen in January 2025.
Long-run (5-year) expectations: 3.2%, matching January levels and down from 3.4% last month.
The decline in inflation expectations is significant because it influences actual consumer and business behavior. If people expect prices to rise slowly, they're less likely to demand aggressive wage increases or rush purchases forward—both dynamics that can entrench inflation.
What's Weighing on Consumers
Despite the uptick, sentiment remains historically weak. Several factors explain the gloom:
Cumulative price increases: While inflation has slowed, prices haven't fallen. The groceries, rent, and utilities that rose during 2022-2024 remain expensive. Consumers feel poorer even as inflation moderates.
Job security concerns: Tech layoffs exceeding 180,000 in 2025 have rattled workers, even those in other industries. Survey respondents increasingly cite employment uncertainty.
Political uncertainty: Consumer sentiment surveys have become increasingly polarized. The incoming administration's policy agenda—tariffs, deregulation, immigration—creates uncertainty that affects economic confidence.
The Say-Do Gap
A puzzling feature of 2025's economy: consumers say they feel terrible, but they keep spending. Retail sales have remained resilient even as sentiment collapsed. This "say-do gap" suggests either:
- Survey responses reflect political sentiment more than economic reality
- Consumers are drawing down savings and taking on debt to maintain lifestyles
- The wealthy (who drive much of consumption) feel better than the average respondent
The answer is probably "all of the above." Economists continue to debate which explanation matters most.
Conference Board Data
The Conference Board's Consumer Confidence Index—a separate survey—is expected to show improvement in December after declining to 88.7 in November. The data will be released later this week.
The two surveys measure slightly different things (Michigan focuses on financial conditions; Conference Board emphasizes labor market) but generally move together.
2026 Implications
Consumer spending drives roughly 70% of U.S. GDP. The path of sentiment has real economic implications:
If confidence rebounds: The economy could sustain above-trend growth as consumers feel comfortable spending.
If confidence stagnates: Spending growth may slow, weighing on corporate earnings and potentially triggering the soft landing everyone fears missing.
If confidence collapses further: A self-fulfilling pessimism could create the recession that current data doesn't support.
The Bottom Line
December's consumer confidence data offers modest encouragement. Sentiment is off the lows, and inflation expectations continue falling. But the 28.5% year-over-year decline shows how far confidence has to climb to return to normal. For 2026, the question is whether consumers' improving inflation outlook translates into genuine optimism—or whether the psychological scars of three years of price increases prove too deep to heal quickly.
