Consumers bought a little cheer back into the holiday season.
The Conference Board’s closely watched Consumer Confidence Index rebounded in December following back-to-back monthly declines.
The index rose sharply to 108.3 for this month, marking an increase from 101.4 in November and the highest reading since April.
That was a big — and welcome — surprise as economists had penciled in another decline, to 100.5.
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Wall Street ran with the news and pushed the market higher with the Dow Jones Industrial Average up 1.5 percent, or 488.03 points, to 33,337.77 in midday trading.
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Leading retail and fashion stocks was Nike Inc., which was also benefiting from a strong quarterly profit report late Tuesday, and saw its stock up 13.5 percent to $117.17 in midday trading.
Among the other industry gainers were Under Armour Inc., up 4.7 percent to $8.65; On Holding, up 4.1 percent to $17.05; Coty Inc., up 4.1 percent to $8.29 ; Lululemon Athletica Inc., up 3.5 percent to $317.71, and Revolve Group Inc., up 3.2 percent to $23.45.
The Consumer Confidence Index is based off a monthly survey that ended Dec. 1 and is comprised of two parts, The Present Situation Index and the forward-looking Expectations Index.
While the results did show a rise in consumer attitudes, the gains were skewed toward how shoppers are feeling now, not how they feel about the future.
The Present Situation Index rose to 147.2 from 138.3 last month. But The Expectations Index increased to 82.4 from 76.7 — with a reading around 80 seen as “associated with recession,” according to the research group.
Lynn Franco, senior director of economic indicators at The Conference Board, said, “The Present Situation and Expectations Indexes improved due to consumers’ more favorable view regarding the economy and jobs. Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus. Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further. This shift in consumers’ preference from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes.”
The wrinkle is that the Jerome Powell-led Federal Reserve is raising interest rates in an effort to cool the job market and consumer demand, looking to reduce shopper’s buying power to bring down inflation.
If shoppers keep spending, Powell and Co. will keep raising rates to fight inflation with the risk being a recession — or more serious recession — next year.