U.S. households became less confident about the economic outlook in December as Congress passed a significant overhaul of the tax code.
The University of Michigan on Friday said its final reading for consumer sentiment in December was 95.9, down from a preliminary figure of 96.8. It was 98.5 in November and 100.7 in October, which was its highest level since 2004.
Continue Reading Below
The index tracking current economic conditions edged up to 113.8 in December from 113.5 in November. But the index tracking expectations about the future dropped to 84.3 from November's 88.9.
Richard Curtin, the Michigan survey's chief economist, said most of the decline in confidence came from lower-income households, and there was a partisan split over whether Republican-backed changes to tax law will have positive or negative effects on the economy.
"Most consumers will know more about the revised tax code when the new paycheck withholding amounts take effect in early 2018," Mr. Curtin said. "While the mostly small gains in take-home pay may not spark an uptick in optimism, those gains would act to dampen any renewed pessimism."
Even with the recent decline in sentiment, U.S. households have been optimistic this year by several measures, a trend bolstered by low unemployment, healthy growth for gross domestic product and record-breaking gains for the stock market.
Mr. Curtin said on average, consumer sentiment in 2017 was the highest since 2000.
"Overall, despite the moderation, the index remains comfortably above its average in this recovery cycle and continues to signal strong consumer sentiment that is likely to be supportive of GDP growth in the coming months," Barclays economist Blerina Uruci said in a note to clients.
Friday's report also showed household expectations about future inflation steadied in December. Consumers said they expected 2.4% annual inflation in five to 10 years, unchanged from November. The expectation for inflation over the next year rose to 2.7% in December from 2.5% in November.
Write to Ben Leubsdorf at email@example.com
(END) Dow Jones Newswires
December 22, 2017 11:38 ET (16:38 GMT)