The Conference Board's Consumer Confidence Index declined in December to 104.7, down from a revised 112.8 (previously 111.7) in November. Consumers' assessment of current business and labor market conditions fell, as did their short-term outlook for income, business, and labor market conditions.

"While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop," the Conference Board said, noting that compared to last month, consumers were"substantially less optimistic about future business conditions and incomes."

"Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November," the report added.

The Conference Board said the share of consumers anticipating a recession over the next 12 months was stable near the series low.

Average one-year inflation expectations saw a small uptick to 5 percent in December from 4.9 percent in November."Asked what goods and services they expect to be more affordable in 2025, consumers mostly selected food and gas," the report said.

On a six-month moving average basis, consumers' purchasing plans for homes were"down slightly" in December, while the intent to buy autos increased again. In addition, more consumers planned to purchase big-ticket items over the next six months. Nevertheless,"[c]onsumers' assessments of their Family's Current Financial Situation were significantly less positive in December compared to last month," the report said.

Consumer confidence has been on a rocket lately, rising to 111.7 in November from 109.6 in October and 99.2 in September, with consumers increasingly psyched about current business and labor market conditions, and as inflation worries have faded. Forecasters see another increase to 113.0 for December.

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.