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
| 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:
|
| 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:
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”.
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| 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.
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| 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.
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| 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.
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| 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.
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Links To All Of Our Analysis This Past Week
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