US: Consumer Confidence


Tue Dec 29 09:00:00 CST 2015

Consensus Consensus Range Actual Previous
Consumer Confidence - Level 93.5 90.7 to 95.0 96.5 90.4

Highlights
Consumer confidence rebounded in December to a reading of 96.5, up from 92.6 in November. The reading is also above the Econoday consensus of 93.5. The present situation index increased from 110.9 last month to 115.3 in December, while the expectations index improved to 83.9 from 80.4 in November.

Those saying business conditions are "good" increased from 25.0 percent to 27.3 percent. However, those saying business conditions are "bad" also increased -- from 16.9 percent to 19.8 percent.

The important reading about the labor market was more positive in December. The proportion claiming jobs are "plentiful" increased from 21.0 percent to 24.1 percent, while those claiming jobs are "hard to get" decreased to 24.7 percent from 25.8 percent. Those anticipating more jobs in the months ahead increased slightly to 12.9 percent from 12.0 percent, while those anticipating fewer jobs decreased from 18.5 percent to 16.6 percent. The proportion of consumers expecting their incomes to increase declined from 17.3 percent to 16.3 percent. However, the proportion expecting a reduction in income decreased from 11.8 percent to 9.7 percent.

Consumers' optimism about the short-term outlook was somewhat mixed. Those expecting business conditions to improve over the next six months decreased slightly to 15.2 percent from 15.7 percent. However, those expecting business conditions to worsen increased slightly to 11.0 percent from 10.6 percent.

Market Consensus Before Announcement
The consumer confidence index, pulled down by lack of confidence in the jobs outlook, simply plunged in November, down nearly 9 points to 90.4. Econoday forecasters see a roughly 3 point bounce back in December to 93.5. Assessments of the jobs market in this report are always very closely watched and the consensus is hinting at month-to-month improvement for December.

Definition
The Conference Board compiles a survey of consumer attitudes on the economy. The headline Consumer Confidence Index is based on consumers' perceptions of current business and employment conditions, as well as their expectations for six months hence regarding business conditions, employment, and income. Three thousand households across the country are surveyed each month.

The Conference Board changed its polling company in 2010. The current polling company is Nielsen Co. with the former being TNS Inc. The switchover reference month for the new data is November 2010. Because of the change in the polling service (even though the questions in the questionnaire are the same) the data are not completely consistent and November 2010 should be considered a break in the series. In general, while the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month.




Description
The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to pull out the big bucks. Confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer confidence did shift down in tandem with the equity market between 2000 and 2002 and then recovered in 2003 and 2004. In 2008 and 2009, the credit crunch and past recession led confidence downward with consumer spending contracting in tandem. More recently during the economic recovery, consumer confidence has edged back up but has been outpaced by improvement in spending.

Since consumer spending accounts for such a large portion of the economy, the markets are always eager to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. It's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.