Consumer Confidence Comes In A Bit Below Expectations

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through September 13. The 79.7 reading is slightly below the 79.9 forecast by Investing.com and 2.1 points below the August upwardly adjusted 81.8 (previously reported at 81.5). The index is now 2.5 points off its five-and-a-half year interim high set in June. Or, to put it another way, the index is 10.9 points below the December 2007 level, which the NBER declared as the start of the Great Recession.

Here is an excerpt from the Conference Board report.

Says Lynn Franco, Director of Economic Indicators: "Consumer Confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed. Consumers' assessment of current business and labor market conditions, however, was more positive. While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead."

Consumers' appraisal of present-day conditions improved moderately. Those claiming business conditions are "good" increased to 19.5 percent from 18.7 percent, while those claiming business conditions are "bad" decreased to 23.9 percent from 24.5 percent. Consumers' assessment of the labor market was also more favorable. Those saying jobs are "plentiful" increased slightly to 11.5 percent from 11.3 percent, while those saying jobs are "hard to get" decreased to a five-year low of 32.7 percent from 33.3 percent.

Consumers' expectations, which had increased in August, declined in September. The percentage of consumers expecting business conditions to improve over the next six months edged up to 20.9 percent from 20.6 percent, while those expecting business conditions to worsen was virtually unchanged at 11.0 percent.

Consumers' outlook for the labor market, however, grew more pessimistic. Those anticipating more jobs in the months ahead decreased to 16.9 percent from 17.5 percent, while those anticipating fewer jobs increased to 19.7 percent from 17.2 percent. The proportion of consumers expecting their incomes to increase declined to 15.4 percent from 17.5 percent.

Finally Casting Off the Recessionary Mindset?

Let's take a step back and put Lynn Franco's interpretation in a larger perspective. The table here shows the average consumer confidence levels for each of the five recessions during the history of this monthly data series, which dates from June 1977. The latest number moves us 10.3 points above the recession mindset.

The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end I have highlighted recessions and included GDP. The exponential regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope clearly resembles the regression trend for real GDP shown below, and it is a far more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference. Today's reading of 79.7 is 1.5% above the current regression level of 78.5.

On a percentile basis, the latest reading is at the 31.2 percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 26.4 percentile of non-recessionary months.

For an additional perspective on consumer attitudes, see my post on the most recent Reuters/University of Michigan Consumer Sentiment Index. Here is the chart from that post.

And finally, let's take a look at the correlation between consumer confidence and small business sentiment, the latter by way of the National Federation of Independent Business (NFIB) Small Business Optimism Index. As the chart illustrates, the two have tracked one another fairly closely since the onset of the Financial Crisis.

The NFIB index has been less volatile than the Conference Board Consumer Confidence Index.