US: Consumer Confidence

Tue Apr 24 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Consumer Confidence - Level 126.1 123.1 to 129.0 128.7 127.7 127.0

The consumer confidence report is showing no wear from high levels, coming in at 128.7 in April and at the high end of the consensus range. Details are very positive led by yet another very low reading for jobs-hard-to-get, down 5 tenths to 15.2 percent in a result that will help lift expectations for strength in the April employment report. Another important reading is a decline in income pessimism as only 6.0 percent see their incomes falling which is a 17-year low.

Buying plans are special positives of the April report including big gains for autos, where sales had already popped up strongly in March, and also housing where this week's data are confirming strength. Inflation expectations, however, remain unchanged at 4.7 percent which is low for this reading.

One note is declining optimism in the stock market: only 32.7 percent see shares rising over the next year which has steadily eroded since a 51.0 percent peak in January. But optimism in fact, whether for the jobs market or income, is the clear takeaway from today's report.

Market Consensus Before Announcement
Getting a boost from this year's tax cut, the weekly consumer comfort index and bi-monthly consumer sentiment index have been hitting expansion highs as has the monthly consumer confidence index. Consensus for April confidence is for slight easing to 126.1 vs 127.7 in March.

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.