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Consumer Confidence Improved in January

January 26, 2016

by Jill Mislinski

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through January 14. The headline number of 98.1, was an increase from the December final reading of 96.3, which is an upward revision from 92.6. Today's number was above the Investing.com forecast of 96.5.

Here is an excerpt from the Conference Board press release.

"Consumer confidence improved slightly in January, following an increase in December,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions held steady, while their expectations for the next six months improved moderately. For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy."

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 57% level of all the monthly data points since June 1977. That's an increase from 52% 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, although a bit of spread has appeared in the second half of 2015.

NFIB Optimism and Consumer Confidence