Consumer Confidence Highest Since January 2008

June 24, 2014

by Doug Short

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through June 13. The headline number of 85.2 was an improvement over the revised May final reading of 82.2, a downward revision from 83.0. Today's number beat the Investing.com forecast of 83.5. The current level is the highest since January 2008.

Here is an excerpt from the Conference Board press release.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence continues to advance and the index is now at its highest level since January 2008 (87.3). June’s increase was driven primarily by improving current conditions, particularly consumers’ assessment of business conditions. Expectations regarding the short-term outlook for the economy and jobs were moderately more favorable, while income expectations were a bit mixed. Still, the momentum going forward remains quite positive.”

Consumers’ appraisal of current conditions improved in June. Those claiming business conditions are “good” increased to 23.0 percent from 21.1 percent, while those stating business conditions are “bad” decreased to 22.8 percent from 24.6 percent. Consumers’ assessment of the job market was also more favorable. Those stating jobs are “plentiful” edged up to 14.7 percent from 14.2 percent, while those claiming jobs are “hard to get” declined to 31.8 percent from 32.2 percent.

Consumers’ expectations were generally more positive in June. The percentage of consumers expecting business conditions to improve over the next six months increased to 18.8 percent from 17.7 percent. However, those expecting business conditions to worsen increased to 11.4 percent from 10.7 percent.

Consumers were more positive about the outlook for the labor market. Those anticipating more jobs in the months ahead increased to 16.3 percent from 15.2 percent, while those anticipating fewer jobs edged down to 18.7 percent from 18.9 percent. Fewer consumers expect their incomes to grow, 15.9 percent versus 18.0 percent, but those expecting a drop in their incomes also declined, to 12.1 percent from 14.5 percent.

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 15.8 points above the recession mindset but remains 9.0 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 85.2 is above the current regression point of 78.2.

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On a percentile basis, the latest reading is at the 38.0 percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 33.6 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.

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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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