Consumers recharged a little during the holiday season.
The Consumer Confidence Index, which is closely monitored by The Conference Board, rebounded in December after consecutive monthly declines.
The index surged to 108.3 this month, up from 101.4 in November and hitting its highest level since April.
This was a big and welcome surprise as economists had expected another drop to 100.5.
Wall Street rallied on the news, with the Dow Jones Industrial Average rising 1.5% (488.03 points) to 33,337.77 in midday trading.
A major retail and fashion stock is Nike Inc., which also benefited from a strong quarterly earnings report late Tuesday, with its shares up 13.5% to $117.17 in midday trading.
Among other industry risers was Under Armor Inc., which rose 4.7% to $8.65. Holding rose 4.1% to $17.05. Coty Inc. rose 4.1% to $8.29. Lululemon Athletica Inc. increased 3.5% to $317.71 and Revolve Group Inc. increased 3.2% to $23.45.
The Consumer Confidence Index is based on the monthly survey ending December 1st and consists of two parts: the Current Status Index and the Future Expectations Index.
The results showed a rise in consumer attitudes, but the rise was biased towards how shoppers were feeling now rather than how they felt about the future.
The Current Situation Index rose to 147.2 from 138.3 last month. However, the Expectations Index he rose from 76.7 to 82.4, with around 80 considered “recession-related” according to the research group.
Lynn Franco, senior director of economic indicators for The Conference Board, said: Inflation expectations fell back in December, hitting the lowest level since September 2021. The recent drop in gas prices has been a major driver. Vacation intentions have improved, but plans to buy homes and expensive appliances have cooled further. This shift in consumer preferences from big-ticket goods to services will continue in 2023, as will headwinds from inflation and rising interest rates. ”
The problem is that the Federal Reserve, led by Jerome Powell, is trying to raise interest rates to cool the job market and consumer demand, lowering the purchasing power of shoppers and lowering inflation.
If shoppers keep shopping, Fed Chairman Powell will keep raising rates to combat inflation.