Consumer Confidence Index

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The COnsumer COnfidence Index fell in December after a slight improvement in November. Today’s report from the Conference Board stated that Consumer confidence now stands at 122.1 (1985=100); November’s print was 128.6. “Reflation’s Rollover” early indicator.

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Ms. Lynn Franco, Director of Economic Indicators at The Conference Board, had this to comment.

“Consumer confidence retreated in December after reaching a 17-year high in November. The decline in confidence was fueled by a somewhat less optimistic outlook for business and job prospects in the coming months. Consumers’ assessment of current conditions, however, improved moderately. Despite the decline in confidence, consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.”

Consumers’ appraisal of present-day conditions was slightly more positive in December. The percentage saying business conditions are “good” increased marginally from 35.0 percent to 35.2 percent, while those saying business conditions are “bad” decreased marginally, from 12.3 percent to 12.1 percent. Consumers’ assessment of the labor market was mixed. Those claiming jobs are “plentiful” decreased from 37.5 percent to 35.7 percent, while those claiming jobs are “hard to get” also decreased, from 16.8 percent to 15.2 percent (a 16-year low).

Consumers’ optimism about the short-term outlook declined sharply in December. The percentage of consumers anticipating business conditions to improve over the next six months declined from 23.1 percent to 20.2 percent, while those expecting business conditions to worsen increased from 6.7 percent to 9.2 percent.

Consumers’ outlook for the job market was also less upbeat than in November. The proportion expecting more jobs in the months ahead decreased from 21.3 percent to 18.4 percent, while those anticipating fewer jobs rose from 12.1 percent to 16.3 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement increased from 20.3 percent to 22.3 percent, while the proportion expecting a decrease also rose, from 7.6 percent to 8.9 percent.

 

Market Sensitivity: Medium, but can be high at turning points in the economy.

What Is It: Examines how consumers feel about jobs, the economy, and spending.

Most Current News Release on the Internet: www.conference-board.org/data/consumerconfidence.cfm

Home Web Address: www.conference-board.org/

Release Time: 10:00 a.m. (ET); announced the last Tuesday of the month being surveyed.

Frequency: Monthly.

Source: The Conference Board.
Bernard Baumohl. The Secrets of Economic Indicators

 

Market Impact

Bonds

Though questions abound regarding its efficacy as a predictor of household spending, a sharp and sustained rise in consumer confidence is nevertheless worrisome to fixed-income investors. This could lead to an acceleration in borrowing and shopping, factors that can fuel faster economic growth and stoke inflation. Bond traders prefer to see consumer confidence less ebullient about the future or an outright decline in the index. This would suggest a retrenchment in spending and more modest economic activity ahead.

Stocks

Crumbling confidence by consumers is not favorable to equities because it can presage declining business sales and fading profits. Shareholders hope consumer confidence stays high to encourage more spending, which is bullish for stocks.
Dollar

A depressed consumer makes foreign investors with exposure in the U.S. markets a bit nervous. It raises the prospects of falling interest rates and a weakening business climate, both of which bode ill for the dollar’s value. Foreign investors might sell the U.S. currency in search of higher yields and a stronger economy elsewhere. On the other hand, an upbeat consumer can lift U.S. interest rates and stock market returns to levels that promise a higher return relative to other regions in the world. This normally has the effect of increasing demand for dollars.

 

-R.W.N II

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