Consumer Confidence Index: The Best Level Since May 2010

Conference Board Consumer Confidence Index was released this morning based on data collected through January 18. The 60.6 reading was significantly above the consensus estimate of 53.5, according to Bloomberg had expected a rise to 54 based on a survey range from 50 to 57.3. Here is an excerpt from the Conference Board report:

The Conference Board Consumer Confidence Index, which had dipped in December, increased in January. The Index now stands at 60.6 (1985=100), up from 53.3 in December. The Present Situation Index improved to 31.0 from 24.9. The Expectations Index increased to 80.3 from 72.3 last month.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for January’s preliminary results was January 18th.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumers have begun the year in better spirits. As a result, the Index is now near levels not seen since last spring (May 2010, Index 62.7). Consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. Income expectations are also more positive. Although pessimists still outnumber optimists, the gap has narrowed.”   More…

The More Sobering Historical Context

Let’s take a step back and put Lynn Franco’s interpretation in a larger perspective. The chart below is intended to help evaluate the historical context for this index as a leading indicator of the economy. Toward this end I have included recessions and GDP. The linear regression through the index data shows the long-term trend of this very volatile indicator. Today’s reading of 60.6 is significantly below the 85.1 of the current regression level (28.7% below, to be precise). In other words, despite today’s nice jump, this indicator remains at levels usually associated with recessions (the double dip in the early 1980s and 1990-1991).

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For an interesting comparison, 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.

The NFIB index has been less volatile than the Conference Board Consumer Confidence Index, but it has likewise remained bleak despite the official end to the recession in June 2009.

Related Articles

Small Business Sentiment Remains in a Stealth Recession by Doug Short

Consumer (Lack of) Confidence by Doug Short

Consumer Contraction May be Bottoming  by Rick Davis

Consumer Confidence is Terrible but Improving  by Steven Hansen

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