As 2025 ended, consumers showed they were excited about the holidays — spending more than analysts expected — but that bright seasonal mood did not extend to their views about where the economy and job market are headed in the new year. The Consumer Confidence Index fell for the fifth month in a row in December, dropping 3.8 points, to 89.1, from an upwardly revised 92.9 in November.
Consumers expressed a negative opinion about business conditions and became more anxious about their job and income prospects.
The Conference Board did say that the responses it collected after the federal government shutdown ended Nov. 12 were more positive than those it received during the congressional impasse. “Despite an upward revision in November related to the end of the shutdown, consumer confidence fell again in December and remained well below [2025’s] January peak,” Dana M. Peterson, The Conference Board’s chief economist, stated in a press release. “Four of five components of the overall index fell, while one was at a level signaling notable weakness.”
The think tank’s index that is based on consumers’ assessment of current business and labor market conditions sank 9.5 points, although a separate index based on consumers’ short-term outlook for those conditions, as well as their income, was steady. That index, known as the Expectations Index, has now been below a reading of 80 for 11 months in a row, a trend that typically signals a recession ahead.
Demographically, on a six-month moving average basis, confidence was lower among all age groups in December, although people younger than 35 remained more confident than people who are older. By income, confidence on the same basis fell for everyone except for those earning less than $15,000 and more than $125,000. Confidence also fell in December for people of all political affiliations.
“Consumers’ write-in responses on factors affecting the economy continued to be led by references to prices and inflation, tariffs and trade, and politics,” Peterson said. “However, December saw increases in mentions of immigration, war and topics related to personal finances, including interest rates, taxes and income, banks and insurance. The responses continued to skew pessimistic but less so than November, potentially due to fewer negative comments about prices and inflation, politics, as well as a rebound in positive responses about interest rates. Notably, the Federal Reserve Board cut monetary policy rates on Dec. 10 for a third time in 2025, which landed in the second half of the survey sample interval.”
The think tank said consumers’ views of their family’s current financial situation “collapsed into negative territory for the first time in nearly four years. However, expectations for their family’s future financial situation were the most positive since January of this year.” Of particular interest to the boating industry, The Conference Board said consumers appear to be more cautious about plans for buying big-ticket items during the next six months.
The University of Michigan had somewhat better results in December from the surveys for its Consumer Sentiment Index, which gained 1.9 points, to 52.9, from 51 in November, “within the margin of error,” Joanne Hsu, director of the university’s Surveys of Consumers, stated in a press release.
“While lower-income consumers posted gains, sentiment for higher-income consumers was little-changed,” Hsu added. “Buying conditions for durable goods fell for the fifth straight month, whereas expectations for personal finances and business conditions rose in December.”
Hsu said job market expectations “lifted a bit [in December], though a solid majority of 63% of consumers still expects unemployment to continue rising during the next year. Despite some signs of improvement to close out the year, sentiment remains nearly 30% below December 2024, as pocketbook issues continue to dominate consumer views of the economy.”
Hsu says that consumers the university surveyed expect inflation to rise by 4.2% in the year ahead. That outlook was the lowest for inflation in 11 months but is still above the 3.3% rate that consumers anticipated for 2024 at the start of the year.
Inflation in November rose less than economists expected. The Labor Department’s Bureau of Labor Statistics said in mid-December that the Consumer Price Index rose 2.7% on a year-over-year basis. The core CPI, which strips out the volatile food and energy categories, rose 2.6% after an increase of 3% in September, the most recent previous month for which data could be collected because of the federal shutdown.
“Inflation was quite a bit cooler than expected in November,” Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin, told Reuters. “Shelter inflation, the biggest component of CPI, simmered down nicely. Some people will dismiss this report as being more unreliable than usual, but ignore it at your own risk. Other indicators like rent costs and used-car prices are consistent with the narrative that the old drivers of inflation aren’t the sources of current inflation.”
The mood at the nation’s small businesses improved slightly in November. The National Federation of Independent Business said its Small Business Optimism Index edged up 0.8 points, to 99, enabling the measure to remain just above its 52-year average of 98. However, the group’s Uncertainty Index, which measures how unsure member business owners are about the trajectory of the economy, rose 3 points, to 91, as more owners expressed reservations about plans for capital spending in the next three to six months.
“Although optimism increased, small business owners are still frustrated by the lack of qualified workers,” NFIB chief economist Bill Dunkelberg stated in a press release. “Despite this, more firms still plan to create new jobs in the near future.” The federation said 21% of member owners cited labor quality as their most important problem; inflation was the primary issue for 15% of them.
The NFIB said the net percentage of member owners who expect the economy to improve in the coming months fell to 15% from 20% in October. A seasonally adjusted 33% of member owners reported job openings they could not fill, up 1% from the previous month and a continuing historically high level. A net 26% of owners, also seasonally adjusted, reported raising pay in November, a total that was unchanged from the previous month.
Confidence among the nation’s home builders increased slightly in December but stayed in what the National Association of Home Builders refers to as “negative territory” — a number on its index that is below 50. The trade group said its NAHB/Wells Fargo Housing Market Index edged up a single point, to 39. Builder sentiment has now been below 50 for a year and eight months. The NAHB blames rising construction costs, tariff and economic uncertainty, and potential buyers remaining on the sidelines in large numbers due to affordability concerns.
“Market conditions remain challenging, with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” NAHB chairman Buddy Hughes, a home builder and developer from Lexington, N.C., stated in a press release. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”
“In positive signs for the market, builders report that future sales expectations have been above the key break-even level of 50 for the past three months, and the recent easing of monetary policy should help builder loan conditions at the start of 2026,” NAHB chief economist Robert Dietz added in a press release. “However, builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high. Rising inventory also has increased competition for newly built homes.”
The latest NAHB survey also found that 40% of builders reported cutting prices in December, down slightly from 41% in November, a result that had been a post-Covid high and marked the first time the measure topped 40%.
Two of the HMI’s three subindexes posted slight gains in December, and the other was flat. Only one topped 50, the business group’s line between good conditions and poor ones. The index that gauges current sales conditions rose 1 point, to 42; the index that measures future sales also rose 1 point, to 52; and the index that charts the traffic of prospective buyers was steady at 26.
Figures for new-home sales from the Commerce Department for November were unavailable because of the lingering effects of the shutdown. New-home sales figures for December are expected around Jan. 27.
Existing-home sales rose by a modest 0.5%, to a seasonally adjusted annual rate of 4.13 million in November, according to figures supplied by the National Association of Realtors. “Existing-home sales increased for the third straight month due to lower mortgage rates this autumn,” NAR chief economist Lawrence Yun stated in a press release. “However, inventory growth is beginning to stall. With distressed property sales at historic lows and housing wealth at an all-time high, homeowners are in no rush to list their properties during the winter months.”
The NAR said the median existing-home sales price in November was $409,200, up 1.2% from the same month a year earlier. It was the 29th consecutive month of year-over-year price increases.
This column first appeared in the February, 2026 issue of Soundings Trade Only.
