A Surprising Decline in Consumer Confidence

April 28, 2015

by Doug Short

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through April 17. The headline number of 95.2 was a substantial drop from the revised March final reading of 101.4, a slight revision from 101.3. Today's number was well below the Investing.com forecast of 102.5.

Here is an excerpt from the Conference Board press release.

“Consumer confidence, which had rebounded in March, gave back all of the gain and more in April,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “This month’s retreat was prompted by a softening in current conditions, likely sparked by the recent lackluster performance of the labor market, and apprehension about the short-term outlook. The Present Situation Index declined for the third consecutive month. Coupled with waning expectations, there is little to suggest that economic momentum will pick up in the months ahead.”

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.

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On a percentile basis, the latest reading is at the 51% level of all the the monthly data points since June 1977. That's a decline from 63% 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.

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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.

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