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Consumer confidence slips at start of 2023 as recession worries grow

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The numbers: A survey of consumer confidence slipped in January to 107.1, reflecting growing worries about a potential recession as rising interest rates and high inflation degrade the U.S. economy.

The closely followed index fell almost 2 points from 109 in December, the nonprofit Conference Board said Tuesday. The index had hit an 11-month high at the end of 2022.

Economists polled by The Wall Street Journal forecast the index to rise to 109.5. Consumer confidence tends to signal whether the economy is getting better or worse.

Key details: A measure of how consumers feel about the economy right now rose to 150.9 in January from in 147.4 in December. That’s the highest level in nine months.

Yet a similar confidence gauge that looks ahead six months dropped to 77.8 from 83.4.

Reading below 80 often signal a recession within the next year, the board said, but the expectations index has hovered below that level in every month except for one since March 2022.

Big picture: The economy has slowed in response to higher interest rates orchestrated by the Federal Reserve to try to quench inflation. Higher borrowing costs depress consumer and business spending.

The U.S. could sink into a recession if the economy gets even weaker.Even so, the Fed is prepared to raise interest rates again on Wednesday as it aims to ensure that inflation is brought back under control.

The rate of inflation has slowed to 6.5% from a 40-year peak of 9.1%, but it’s still triple the Fed’s 2% goal. Senior Fed officials say persistently high inflation is more damaging to the economy in the long run than a temporary slowdown or decline in growth.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.23%

and S&P 500
SPX,
+0.57%

shed most of their early gains in Tuesday trades.

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