The Conference Board's consumer confidence index for January is down 1.9 points to 107.1 after an upwardly revised 109.0 in December. The decline is a disappointing performance compared to the consensus of 109.0 in an Econoday survey. Although consumers' perceptions of present conditions improved, the outlook for the near future worsened.

The present situation index is up 3.5 points to 105.9 in January, in part due to more positive perceptions for the labor market with jobs seen more plentiful and less hard to get. The expectations index is down 5.6 points to 77.8 in January. The Conference Board says a reading below 80 in the expectations index is a recession signal.

In January, 3 out of 5 components were lower. Measures for expected personal income are down narrowly, but those for expected employment and expected business conditions are sizably lower. There are positive contributions from present employment and present business conditions.

After jumping 7 points in December, the consumer confidence index is expected to firm only 0.7 of a point to 109.0 in January.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.