The Conference Board’s measure of US consumer confidence fell to 61.1 in January 2012 from the upwardly revised 64.8 reading seen in December 2011 (initially reported as 64.5) that had represented the measure’s highest level since April. The deterioration in consumer sentiment in January comes as a surprise as market expectations were for an increase to 68.0.

The decline in the month reflected deterioration in both in the “expectations” and the “present situation” components, although most of the damage was seen in the former. The present situation index fell to 38.4 from 46.5 in December as consumers’ appraisals of business conditions and the job market were more pessimistic than last month. In terms of the latter, the “jobs hard to get” index rose 1.9 points to 43.5, while the “jobs plentiful” index decreased to 6.1 from 6.6, which had represented its best reading since January 2009. These combined to decrease the employment differential (those saying jobs are “plentiful” minus respondents saying jobs are “hard to get”) to -37.4 from the -35.0 reported in December. The expectations component fell by a more modest 0.8 points to 76.2 as increased pessimism in the outlooks for business conditions was partially offset by improved expectations for the labour market.

While today’s reported decline provides a somewhat discouraging starting point for 2012, the headline measure remains elevated compared to recent troughs seen in the summer and fall, and solace can be taken in the fact that the key expectations component remained relatively buoyant. We assume that the strengthening labour market conditions seen at the end of 2011 will continue into 2012, which should lead to an improvement in consumers’ viewpoints and should provide a modest boost to consumer spending with the growth maintaining an upward trajectory during 2012.

In a separate release this morning, the S&P/Case-Shiller 20-City Composite measure of US house prices declined in November 2011, with the seasonally-adjusted index down 0.7% on a month-over-month basis. The decline was larger than market expectations for a 0.5% decrease and follows a downwardly revised 0.7% drop in October (previously reported as -0.6%). The unadjusted index fell by 3.7% on a year-over-year basis in the month compared to the unrevised 3.4% annual decline seen in October.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.