Consumer Confidence Bounces Back in March

By Doug Short
March 25, 2014

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The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through March 14. The 82.3 reading was above the 78.6 forecast of Investing.com and 4.0 above the February 78.3 (previously reported at 78.1). This measure of confidence has risen from its interim low of 72.0 in November and it now at a new post-Financial Crisis high.

Here is an excerpt from the Conference Board report.

"Consumer confidence improved in March, as expectations for the short-term outlook bounced back from February's decline," said Lynn Franco, Director of Economic Indicators at The Conference Board. "While consumers were moderately more upbeat about future job prospects and the overall economy, they were less optimistic about income growth. The Present Situation index, which had been on an upward trend for the past four months, was relatively unchanged in March. Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead."

Consumers' assessment of current conditions was little changed in March. Those claiming business conditions are "good" increased to 22.9 percent from 21.2 percent; however, those claiming business conditions are "bad" also rose, to 23.2 percent from 22.0 percent. Consumers' appraisal of the labor market was relatively unchanged. Those claiming jobs are "plentiful" decreased marginally to 13.1 percent from 13.4 percent, while those saying jobs are "hard to get" increased slightly to 33.0 percent from 32.4 percent.

Consumers' expectations, which fell last month, rebounded in March. The percentage of consumers expecting business conditions to improve over the next six months increased to 18.1 percent from 17.3 percent, while those anticipating business conditions to worsen declined to 10.2 percent from 13.6 percent. Consumers' outlook for the labor market was also moderately more optimistic. Those expecting more jobs in the months ahead edged up to 13.9 percent from 13.7 percent, while those expecting fewer jobs fell to 18.0 percent from 20.9 percent. The proportion of consumers expecting their incomes to grow declined to 14.9 from 15.8 percent, but those anticipating a decline in their incomes also decreased, to 12.1 percent from 13.4 percent.   [press release]

Putting the Latest Number in Context

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 has moved 12.9 points above the recession mindset but remains 12.0 points below the non-recession average.

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 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 82.3 is now above the current regression point of 78.2.

 

 

On a percentile basis, the latest reading is at the 35.3 percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 31.0 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.

 

 

It will be interesting to see if the next NFIB report echoes the bounce in consumer optimism.

 

 

 

 

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