The September 2013 Conference Board Consumer Confidence Index declined slightly following last months slight increase. The market expected this index to come in at 80.0 to 83.0 (versus the 79.7 reported).
This index remains in territory associated with past recessions. Note that this data is considered preliminary, and the cutoff for these results was 13 September 2013.
Here is an excerpt from Lynn Franco, Director of Economic Indicators at The Conference Board:
The Conference Board Consumer Confidence Index®, which had increased slightly in August, decreased in September. The Index now stands at 79.7 (1985=100), down from 81.8 in August. The Present Situation Index grew to 73.2 from 70.9. The Expectations Index fell to 84.1 from 89.0 last month.
The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was September 13.
Says Lynn Franco, Director of Economic Indicators: “Consumer Confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed. Consumers’ assessment of current business and labor market conditions, however, was more positive. While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead.”
Consumers’ appraisal of present-day conditions improved moderately. Those claiming business conditions are “good” increased to 19.5 percent from 18.7 percent, while those claiming business conditions are “bad” decreased to 23.9 percent from 24.5 percent. Consumers’ assessment of the labor market was also more favorable. Those saying jobs are “plentiful” increased slightly to 11.5 percent from 11.3 percent, while those saying jobs are “hard to get” decreased to a five-year low of 32.7 percent from 33.3 percent.
Consumers’ expectations, which had increased in August, declined in September. The percentage of consumers expecting business conditions to improve over the next six months edged up to 20.9 percent from 20.6 percent, while those expecting business conditions to worsen was virtually unchanged at 11.0 percent.
Consumers’ outlook for the labor market, however, grew more pessimistic. Those anticipating more jobs in the months ahead decreased to 16.9 percent from 17.5 percent, while those anticipating fewer jobs increased to 19.7 percent from 17.2 percent. The proportion of consumers expecting their incomes to increase declined to 15.4 percent from 17.5 percent.
Finally Casting Off the Recessionary Mindset?
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 moves us 10.3 points above the recession mindset.
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 far 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 79.7 is 1.5% above the current regression level of 78.5.
On a percentile basis, the latest reading is at the 31.2 percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 26.4 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.
The NFIB index has been less volatile than the Conference Board Consumer Confidence Index.
Caveats in Using the Conference Board’s Consumer Confidence Index
According to Bloomberg, the following caveat is provided when reviewing this series:
The underlying series for ”planned purchases” (autos, homes, and major appliances) and ”vacation intentions” showed larger increases in November 2010 levels, primarily due to sample design differences. These level shifts will be treated as breaks, and there will be no historial revisions. Neither series is included in or has any impact on the Consumer Confidence Index.The switch to the Census X-12 seasonal adjustment program produced only minor differences for both levels and month-to-month changes. As a result, The Conference Board did not find it necessary to undertake a full historical revision of the CCI time series based on the seasonal adjustment method. The restated data for November 2010, December 2010 and January 2011 (preliminary data) are based on the prior seasonal adjustment method. This index is an average of responses to the following questions: 1. Respondents appraisal of current business conditions. 2. Respondents expectations regarding business conditions six months hence. 3. Respondents appraisal of the current employment conditions. 4. Respondents expectations regarding employment conditions six months hence. 5. Respondents expectations regarding their total family income six months hence. For each of the 5 questions, there are three response options: Postive, Negative and Neutral. The response proportions to each question are seasonally adjusted. For each of the five question (above), the POSITIVE figure is divided by the sum of the POSITIVE and NEGATIVE to yield a proportion, which we call the ‘RELATIVE’ value. For each question, the average RELATIVE for the calendar year 1985 is then used as a benchmark to yield the INDEX value for that question. From 1967 to mid 1977 the CCI was bi-monthly.
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.