Consumer confidence in January was largely unchanged from December 2015, according to the University of Michigan Surveys of Consumers. The confidence reading was just 0.6 percent below last month’s level, a shift attributed to stock market declines reflected in the erosion of household wealth, as well as weakened prospects for the national economy.

Conducted by the U-M Institute for Social Research (ISR) since 1946, the surveys monitor consumer attitudes and expectations and involve a rotating panel based on a nationally representative sample and phone interviews conducted throughout the month.

The overall level of confidence is below the January 2015 peak, but thus far the decline amounts to just 6.2 percent, a drop that does not indicate an impending recession but rather a somewhat slower pace of economic growth in 2016. Overall, the data point toward gains of 2.7 percent in real consumption expenditures during 2016.

“Consumers anticipate the slowdown in the pace of growth will be accompanied by smaller wage gains and slight increases rather than declines in unemployment by the end of 2016,” says U-M economist Richard Curtin, who directs the surveys. “Importantly, it has been very low inflation rates that have maintained inflation-adjusted income expectations at the highest levels since 2007. The Fed’s success at pushing the inflation rate higher may well outdistance the pace of wage gains, offsetting a critical strength in consumers’ financial expectations. Consumers will actively demonstrate their resistance by moderating their purchases in the face of price hikes, acting to erase the Fed’s rationale for higher rates.”

Findings from the survey include:

  • The smallest number of consumers in a year reported that their finances had recently improved, and consumers expected the smallest gains in their nominal incomes since the summer of 2014. Despite the falloff in nominal income expectations, ISR reports inflation-adjusted income expectations remained unchanged at very favorable levels.

  • Among households with incomes in the top third, one in three mentioned declines in stock prices and a weakened global economy. While consumers still viewed prospects for the economy favorably, they expected a slowing in the pace of growth. Their primary concern was that the growth slowdown will lead to a slightly higher jobless rate by the end of 2016.

  • The Consumer Sentiment Index was 92.0 in the January 2016 survey, just below December’s 92.6 and substantially below last January’s 98.1. The Current Conditions Index was 106.4 in January 2016, down from last month’s 108.1 and last year’s 109.3. The Expectations Index was 82.7 in January and December, but well below last year’s 91.0. The small falloff from last year indicates slower growth, not a recession.