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Confidence in the economy fell sharply in January, slumping to a 12-year low, according to the Conference Board latest survey data. On its face, the sharp drop raises questions about consumer spending in the months ahead. But until there’s confirmation in the hard data, it’s best to view the polling cautiously and look for supporting context in other numbers.
The surprise drop in the Consumer Confidence Index (CCI) for this month could be an early warning for the economy, which is powered by consumer spending. But history suggests reserving judgment is sensible when you consider that the relationship between survey data and the economy is weak.
It could be different this time, of course, but it’s too early to confidently make that call. Nonetheless, the latest results are worrisome. “Confidence collapsed in January, as consumer concerns about both the present situation and expectations for the future deepened,” said Dana Peterson, chief economist at The Conference Board. “All five components of the Index deteriorated, driving the overall Index to its lowest level since May 2014 (82.2) — surpassing its COVID-19 pandemic depths.”
To gauge if CCI is noise or signal for the near term, it’s essential to look for confirmation in other data sets, and on that point, the numbers from elsewhere still leave plenty of room for debate. Let’s start with an alternative measure of the mood on Main Street via Consumer Sentiment Index: the University of Michigan’s polling also shows subdued sentiment in January, hovering near the lowest level since 2022.
But the Consumer Sentiment Index turned up this month. Here, too, there are concerning signs, but the latest reading suggests that not much changed this month vs. recent history.
Turning to hard data on spending paints a brighter picture, albeit one based on lagging numbers due to the government shutdown. Looking through the short-term noise, the year-over-year change in personal consumption expenditures rose 5.4% through November, a middling pace relative to previous months in 2025.
A more timely update of consumer spending habits also shows that the recent bias for growth continues. The Redbook Index tracks same-store sales and the 7.1% year-over-year increase through Jan. 24 is in line with results over the past several months.
Turning to the broader economic trend, the Dallas Fed’s Weekly Economic Index (WEI) also points to comparable growth compared with recent history. Reporting on data through Jan. 17, WEI continues to print at 2%-plus reading, which is in line with the relatively solid 2.3% four-quarter GDP growth through third quarter 2025.
As for the upcoming (and delayed) fourth-quarter GDP report, the current debate is whether growth accelerated (per the Atlanta Fed’s GDPNow model), or slowed to a moderate but still-encouraging pace, as indicated by the median of several nowcasts, as The Capital Spectator reported on Friday.
Given the preponderance of relatively upbeat data beyond polling consumers, the hard numbers suggest we should be wary of reading too much in mood measures on Main Street for managing economic expectations.
“Admittedly, the expectations index has greatly overstated the weakness in spending in recent quarters,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “But we’d be surprised if its recent deterioration proves to be an entirely false signal, particularly given the recent stagnation in real incomes and the already rock-bottom personal saving rate.”
Fair enough. But until the implied warnings in consumer surveys start resonating in other data sets, it’s still best to take a trust-but-verify approach to polling-based warnings.