US: Consumer Confidence

Tue Nov 28 09:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Consumer Confidence - Level 124.5 123.0 to 127.0 129.5 125.9 126.2

Consumer confidence continues to soar, at 129.5 in November which is a new 17-year high and easily surpasses Econoday's top estimate. The strength is derived from the labor market where a very low 16.9 percent describe jobs as currently hard to get. This reading is closely watched and will boost expectations for another strong monthly employment report. And extending strength is expected for the labor market with optimists on the jobs outlook surging nearly 4 percentage points to 22.6 percent and nearly double pessimists who are down 6 tenths to only 11.0 percent. Confidence is likewise booming for the stock market where 46.0 percent see stocks rising over the next year which is up 3.8 points from October. Bears are down to 19.0 percent from last month's 22.7 percent.

The combination of expected gains in jobs together with expected gains for stocks is making for unusual confidence in the year-ahead income outlook where 20.1 percent see gains and only 7.6 percent see declines. This is a core reading and underscores the report's level of strength.

Not favorable, however, are inflation expectations which are down 2 tenths to 4.5 percent which is very low for this reading. Buying plans are mixed with cars, after a spike in October, back down but with housing up.

Wage growth has been limited but so has price inflation which perhaps is another factor boosting income expectations. In any case, consumer confidence as measured by this report and others is enjoying its best run in a generation.

Market Consensus Before Announcement
Consumer confidence, at 125.9, is coming off a 17-year high in October when assessments of employment and income expectations were unusually strong. The Econoday consensus is calling for 124.5 in November.

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. In general, while the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month.

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.