They may have spent wildly for the holiday, but American consumers are feeling less confident about the economy.
The Consumer Confidence Index was down to 128.1 in December, compared with 136.4 the month before.
An interesting twist considering consumers were out shopping more than usual this holiday season — sales were up 5.1 percent compared with the same time last year, according to a recent report by Mastercard. That’s roughly $850 billion in sales, the strongest number in six years, for the period between Nov. 1 and Dec. 24.
“Sentiment and sales are moving in opposite directions,” said Simeon Siegel, a retail analyst at Nomura Instinet. “The reality is that all that meshes together to create a lot of uncertainty.”
The conflicting signals can be traced back to several culprits, including macro fears, like dwindling job prospects, the continued threat of tariffs with China and a possible economic slowdown.
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“While consumers are ending 2018 on a strong note, back-to-back declines in expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement.
Daily headlines about the stock market’s volatility aren’t helping tame fears, either. In fact, the wild ride on Wall Street has become standard throughout 2018.
Most recently, investors fretted over a possible correction after the Dow Jones Industrial Average shed about 400 points on Christmas Eve, only to have the markets reverse the next trading day. And not only did the market move in the opposite direction, but Wednesday marked the largest single-day gain in history, with all three major indices closing up and the Dow surging more than 1,000 points.
Some of the best performers of the day were retail stocks, with the SPDR S&P Retail index jumping 5.75 percent to $40.66.
Individually, Nike, Under Armour, Lululemon Athletica Inc., American Eagle Outfitters Inc., Abercrombie & Fitch Co., Kohl’s Corp. and Tiffany & Co. all made gains. Amazon rose 9.45 percent after announcing it had the best holiday season ever.
But the fun was short-lived. The Dow fell once again during Thursday’s trading session — this time 600 points — and both the SPDR S&P Retail index and individual retail stocks were in the red for most of the session.
Then, in a move that startled seemingly everyone, the Dow closed 260 points higher to 23,138.82.
Siegel said the volatility is also tied to company-specific concerns, such as inventory control and decreased margins.
The surplus of inventory means many retailers have lost the ability to raise prices and end up having more promotions to clean out channels, he said. Investor fears lead to sell-offs. In addition, the rise in online shopping means increased shipping and advertisement costs, which cut into profits.
Even so, Gerald Storch, chief executive officer of Storch Advisors, a retail advisory group, said this has little effect on consumers. And while the consumer sentiment index may be lower than last month, the decline is still off of historically high levels.
“Most consumers don’t care about the yield curve; they don’t care about some theoretical risks of recession; most consumers don’t care about the stock market. It doesn’t affect them personally,” Storch said. “Most consumers spend based on their wallet, on what they have now. Unless something changes, they’ll keep buying.”