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Consumer Confidence Drops Nine Points

July 28, 2015

by Jill Mislinski

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 16. The headline number of 90.9 was a significant drop from the June final reading of 99.8, a downward revision of June's initial 101.4. Today's number was below the Investing.com forecast of 100.

Here is an excerpt from the Conference Board press release.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "Consumer confidence declined sharply in July, following a gain in June. Consumers continue to assess current conditions favorably, but their short-term expectations deteriorated this month. A less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the situation in Greece and China, appears to have shaken consumers’ confidence. Overall, the Index remains at levels associated with an expanding economy and a relatively confident consumer."

Putting the Latest Number in Context

The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end we have highlighted recessions and included GDP. The 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 resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference.

Consumer Confidence

On a percentile basis, the latest reading is at the 44% level of all the the monthly data points since June 1977. That's a decrease from 60% previous month.

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

Consumer Sentiment

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.

NFIB Optimism and Consumer Confidence