U.S. consumer confidence fell in December for a second straight month to the lowest level in four months, driven by fears of steep tax increases and government spending cuts set to take effect next week.
The Conference Board’s consumer confidence index fell to 65.1 this month from a downwardly revised 71.5 in November. Economists polled by Reuters had expected a reading of 70.
“Consumers' expectations retreated sharply in December, resulting in a decline in the overall index," said Lynn Franco, director of economic indicators at the Conference Board, in a statement. "The sudden turnaround was most likely caused by uncertainty surrounding the oncoming fiscal cliff."
Franco said a similar decline in consumer expectations was seen in August 2011 during the debt ceiling debate. "While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions,” Franco said.
A barometer of expectations for the next six months deteriorated to its lowest level since 2011. Meanwhile, a gauge of consumers’ view on the present situation increased to 62.8 from 54.7.
"The better assessment of current economic conditions is in accord with recent incoming data suggesting the economy maintained solid momentum in Q4 2012, but consumers’ rising concern about the future indicates they recognize that they face a large potential drop in income if no agreement on the fiscal cliff is reached soon," said Dean Maki, chief U.S. economist at Barclays Capital, in a note.