The Conference Board's consumer confidence index is down 4.2 points to 106.7 in February after a sizeable downward revision to 110.9 in January (previously 114.8). The revision in the January index pulls back on the perceived upward momentum for consumer confidence. Taking into account the January revision, overall consumer confidence is much the same over the past three months. The February reading is well below the consensus of 115.0 in the Econoday survey of forecasters.

A review of the consumer confidence index over the past year suggests that underlying attitudes about the present and future economy have not altered much behind the month-to-month variation. Perceptions of current conditions and expectations for six months from now have varied more over time, but the story remains essentially the same. Consumers continue to worry about inflation although less than they did and about remaining employed. They are concerned about things like geopolitical events and the impact on the economic outlook, and see less possibility for lower financing costs in the near future. The prospect of higher earnings is moderating along with the cooling in job openings and the pace of hiring.

The current conditions index is down to 147.2 in February after rising to 154.9 in January, possibly reflecting that some households saw a gain in income through cost-of-living adjustments (COLA) or mandated increases in minimum wages. The six-month expectations index dips to 79.8 in February after 81.5 in January. The Conference Board notes that a reading of the expectations index below 80 is consistent with an outlook for recession, though the February level is scarcely below this threshold.

In February four of the five components are lower. Consumers are less confident about present business conditions and present employment, and about expected business conditions and expected employment. The component for expected personal income is a bit stronger and above January's anticipated income gains, but points to only modest anticipation of higher income.

The consumer confidence index is expected to rise a further though slight 2 tenths in February to 115.0. January's 114.8 was ahead of expectations and nearly 7 points above December.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. 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 and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying 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. With this in mind, 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.