Consumer confidence ended 2023 on a five-month high as consumers were more optimistic about inflation and the overall economic outlook. Optimism in December was primarily driven by slowing inflation, expectations of lower interest rates in 2024, and fading fears of recession, according to an analysis of Conference Board data by the NAHB.

The Consumer Confidence Index, reported by the Conference Board, rose 9.7 points from 101.0 to 110.7 in December, the highest level since August 2023. The Present Situation Index rose 12.0 points from 136.5 to 148.5, while the Expectation Situation Index increased 8.2 points from 77.4 to 85.6. Historically, an Expectation Index reading below 80 often signals a recession within a year.

Consumers were more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve rose from 17.2% to 18.7%, while those expecting business conditions to deteriorate fell from 20.1% to 16.0%. Similarly, expectations of employment over the next six months were more favorable. The share of respondents expecting “more jobs” increased by 1.1 percentage points to 17.8%, and those anticipating “fewer jobs” decreased by 2.9 percentage points to 17.2%.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home increased to 5.9% in December. Of those, respondents planning to buy a newly constructed home rose to 0.7%, and those planning to buy an existing home climbed to 2.3%.