The gauge of consumer expectations fell to 84.6 from 88.9 in November. In contrast, the current conditions index went up to 115.9 from 113.5.
Also, Americans expect the inflation rate to be 2.8 percent next year, higher than 2.5 percent in November. The 5-year expectation also increased to 2.5 percent from 2.4 percent.
Consumer sentiment has remained quite favorable although it continued to slowly recede in early December from its October cyclical peak. Most of the recent decline was concentrated in the long-term prospects for the economy, while consumers thought current economic conditions have continued to improve. Importantly, the largest decline in long-term economic prospects was recorded among Democrats, which reflected their concerns about the impact of the proposed changes in taxes. Perhaps the most important changes in early December were higher income expectations as well as a higher expected inflation rate in 2018. Income gains have been slowly improving during the past year, and the data indicate that trend has continued. In contrast, the rise in inflation expectations in early December was a surprise, and confidence in this finding must await confirmation in the months ahead before any inferences are drawn. Buying plans for durables have improved in early December, largely due to attractive pricing, in contrast to the rise in the expected inflation rate. Overall, the data signal an expected gain of 2.7% in real consumption expenditures in 2018.