The gauge of consumer expectations fell to 88.9 from 90.5 in October but was higher than a preliminary of 87.6. The current conditions index went down to 113.5 from 116.5 in October and a preliminary reading of 113.6.
Also, Americans expect the inflation rate to be 2.5 percent, next year, higher than 2.4 percent in October but lower than a preliminary of 2.6 percent. The 5-year expectation was also revised down to 2.4 percent from 2.5 percent in October and in the first estimate.
What has changed recently is the degree of certainty with which consumers hold their economic expectations. In contrast to the media buzz about approaching cyclical peaks and an aging expansion, with the implication of greater uncertainty about future economic trends, consumers have voiced greater certainty about their expectations for income, employment, and inflation. Inflation expectations have shown the smallest dispersion on record, and increased certainty about future income and job prospects has become a key factor that has supported discretionary purchases. To be sure, caution is warranted given that the current expansion will soon be the second longest expansion since the mid-1800s, as well as the potential for significant changes in tax policies and the new Fed leadership and Board members. Interestingly, the data indicate that neither changes in fiscal nor monetary policies have yet had any noticeable impact on consumer expectations. Overall, the data signal an expected gain of 2.7% in real consumption expenditures in 2018, and more importantly for retailers, the best runup to the holiday shopping season in a decade.