posted on 27 January 2015
The Conference Board Consumer Confidence Index improved sharply after its increase last month. The market expected this index to come in at 93.5 to 100.0 (consensus 96.0) versus the 102.9 reported.
This index still remains in territory associated with past recessions. Note that this data is considered preliminary, and the cutoff for these results was 15 January 2015.
Here is an excerpt from The Conference Board:
Putting the Latest Number in Context
Let's take a step back and put Lynn Franco's interpretation in a larger perspective. The table here shows the average consumer confidence levels for each of the five recessions during the history of this monthly data series, which dates from June 1977. The latest number is 33.5 points above the recession mindset and 8.7 points below the non-recession average.
The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end I have highlighted recessions and included GDP. The exponential regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope clearly resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference. Today's reading of 102.9 is well above the current regression point of 78.8.
On a percentile basis, the latest reading is at the 47th percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 43rd percentile of non-recessionary months.
For an additional perspective on consumer attitudes, see my post on the most recent Reuters/University of Michigan Consumer Sentiment Index. Here is the chart from that post.
And finally, let's take a look at the correlation between consumer confidence and small business sentiment, the latter by way of the National Federation of Independent Business (NFIB) Small Business Optimism Index. As the chart illustrates, the two have tracked one another fairly closely since the onset of the Financial Crisis.
Caveats in Using the Conference Board's Consumer Confidence Index
According to Bloomberg, the following caveat is provided when reviewing this series:
This is a survey based on a probability-design random sample - conducted for The Conference Board by Nielsen. Surveys are a quantification of opinion rather than facts and data.
Observers of consumer sentiment polls should be aware they are imperfect quantifications of opinion. The question arises whether they are a rear view window or a forward looking indicator - or possibly a little of each. There is little question, however, that poor consumer sentiment corresponds to poor economic performance. Econintersect believes that consumer sentiment is mostly a coincident or lagging economic indicator.
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