Consumer Inflation expectations fall to a 143 month low

The December Conference Board Consumer Confidence survey had some interesting results. One of the more noteworthy changes were in regards to equity price expectations. The percentage of respondents who expect equity prices to increase over the next 12-months shot up by nearly 14 points while those who expect stock prices to fall declined by nearly 11 points from November to December. The difference between the two is now over 23 percentage points which is the highest level since February 2007.

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Another major change developed among older and younger consumers. Since this summer, the 55 and older cohort has become much more confident as the series has increased from 73.9 to 105.5, the highest level since July 2007. Meanwhile, the under 35 cohort actually saw confidence decline from a 17 year high of 138.5 in November to 118.9 in December. The under 35 group remains more confident than the over 55, however, the spread between the two narrowed to -13.4 which is the closest the confidence level of these two groups has been since January 2009.

The confidence levels between the highest and lowest income earners remains near all-time highs. Over the past several years, the spread between the two income groups has been consistently higher than at any other point going back to 1988. The current confidence spread of 61.7 points is the second highest level in 2016.

Lastly, while many investors are expecting higher inflation next year consumers certainly are not. Inflation expectations fell to a 143 month low as consumers currently expect inflation to rise by only 4.5% over the next 12 months. Since 2011 there has been a steady decrease in inflation expectations among consumers and current expectations are back in the pre-2000s commodity boom range.

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