Weekly Economic Release Summary: What Is Consumer Confidence Saying About The Economy In 2020

Written by Steven Hansen

Although I am not a big fan of opinion polls, I give the devil his due when it comes to consumer confidence. Consumer confidence has a high correlation to GDP and consumer confidence indices are posted several months before advance GDP data is released for the same period.

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Investopedia describes consumer confidence:

Essentially, it is a barometer of the health of the U.S. economy and is based on consumers perceptions of current business and employment condition, and their expectations for business, employment, and income for the next six months.

Both of the consumer confidence polls I track – Michigan Consumer Confidence and The Conference Board Consumer Confidence – have bounced around in a narrow range in 2019. However, when viewing these indices in year-over-year percent change, they have been perceptively weakening.

The chart below pits the University of Michigan Consumer Sentiment Index and the OECD Consumer Confidence Indicator (aka Conference Board Consumer Confidence) to the Year-over-Year percent change in GDP.

So what is consumer confidence telling us about 2020?

I am a trend person as trends continue until they do not. I would bet on trends continuing as the most likely outcome in most situations. Therefore consumer confidence is suggesting that the economy will continue slowing as we move into 2020.

Economic Forecast

The Econintersect Economic Index (January 2020) forecast fell again this month and continues to show the lowest level of growth since the economic slowdown in 2016. The current reading is now marginally below the 2016 minimum. The ongoing weakness of manufacturing, transport, and imports continues to weigh on our economic forecast. It is interesting that other economic forecasts are all over the map in the direction of the economy.

Although our index is now in negative territory similar to 2016, this penetration into negative territory is not yet severe or persistent – and our opinion is that our index is not suggesting an economic contraction at this point. But another month of decline might be enough to suggest a possible recession is coming.

Our employment forecast is forecasting POOR employment growth.

Economic Releases This Past Week

The following table summarizes the more significant economic releases this past week. For more detailed analysis – please visit our landing page which provides links to our complete analyses.

Overall this week:
coincident indicators show some improvement, leading indicators are mixed
median inflation adjusted household income declined in November
home sales remain on an improving trend line
construction spending remains on an improving trend line
transport continues weak and in contraction

**Economic Release Summary For This Week**
Release	Potential Economic Impact	Comment
November Coincident Indicators	improving but growth remains below average	The year-over-year rate of growth of various coincident indices were generally better relative to last month – but in most cases, the rate of growth is below average. Generally, the coincident indices are showing modest growth. Econintersect‘s analysis of the coincident indices is that: The Philly Fed US Coincident index year-over-year rate of growth improved from last month – but the year-over-year growth rate is below the levels seen in the last few years. The Aruoba-Diebold-Scotti business conditions show above-average business conditions. The rate of growth of the Conference Board Coincident Index marginally improved but is in the low part of the range seen since the end of the Great Recession. ECRI’s Coincident Index’s rate of growth was unchanged – and remains below average for the values seen in the last 2 years. The CFNAI rate of growth is below the historical trend rate of growth (zero-line) – but marginally improved.
November Sentier Median Family Income	down month-over-month but up year-over-year	New data from the monthly Current Population Survey (CPS) indicate that the median annual household income in November 2019 was $66,043, which is $599 (or 0.9 percent) lower than October 2019 ($66,642). The November 2019 median is 1.9 percent higher than that for November 2018 ($64,836).
November Pending Home Sales	n/a	The National Association of Realtors (NAR) seasonally adjusted pending home sales index improved. Our analysis shows the year-over-year rate of growth improved. The quote of the day from this NAR release: … Note that housing inventory has been in decline for six straight months dating back to June 2019 … The year-over-year growth is in positive territory. The data is very noisy and must be averaged to make sense of the situation. Shorter-term trends are now improving.
October Case-Shiller Home Prices	n/a	The non-seasonally adjusted S And P CoreLogic Case-Shiller home price index (20 cities) year-over-year rate of home price growth improved from 2.1 % to 2.2 %. The index authors stated, “As was the case last month, after a long period of decelerating price increases, the national, 10-city, and 20-city composites all rose at a modestly faster rate in October compared to September”.
November Leading Index Review	forecasts soft growth into 2Q2020	At this point, Econintersect continues to see NO particular dynamic at this time which will deliver noticeably better growth in the foreseeable future – and no indicator is yet forecasting a recession over the next six months. Chemical Activity Barometer (CAB) growth rate is below average for times of economic expansion and its rate of growth continues to slow (and now is in contraction) ECRI’s WLI is forecasting insignificant growth in the business cycle six months from today – but the rate of growth has been improving. The Conference Board (LEI) 6 month rolling average suggesting little growth over the next 6 months – and has a slowing growth trend line The Philly Fed’s Leading Index continued backward revisions make this index worthless – and it is showing relatively weak growth. The trend lines have been in a long term decline. Econintersect’s Economic Index is projecting a slowing rate of growth – and is now in contraction.
November Construction Spending	improvement trend in play	The headlines say construction spending improved month-over-month. Our analysis shows the rolling averages improved. Also note that inflation is grabbing hold, and the inflation-adjusted numbers are slightly in contraction. Consider this a better report relative to last month.
Surveys	manufacturing and consumer confidence remains very soft	ISM Chicago Manufacturing – The Chicago Business Barometer rose 2.6 points in December, hitting a four-month high of 48.9. Expectations this month from Econoday were 45.1 to 50.0 (consensus 47.9). A number below 50 indicates contraction. Dallas Fed Manufacturing – Important subindices new orders modestly improved (and returned to expansion) and unfilled orders improving and but remaining in contraction. The survey is near the lowest level seen in over 3 years. This should be considered a modestly better report relative to last month. The expectations from Econoday were -3.0 to +1.5 (consensus +1.0) for the general activity index and the reported value was 3.6. Conference Board Consumer Confidence – The latest Conference Board Consumer Confidence Index’s headline number decreased marginally in December, following a slight increase in November. The Index now stands at 126.5 (1985=100), down from 126.8 (an upward revision) in November. Consumer confidence had been on a multi-year upswing. The current volatility is showing uncertainty by consumers. Bottom line is that consumer confidence is relatively unchanged over the last two years. ISM and Markit Manufacturing –The ISM Manufacturing survey insignificantly declined and remains in contraction. The key internals remains in contraction. The Markit PMI manufacturing Index remained barely in positive territory and insignificantly declined.
Weekly Rail Transport	Definitely not positive news	Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but the year-to-date has slipped into contraction.