Consumer Confidence Weakens in February
The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through February 13. The 78.1 reading was below the 80.0 forecast of Investing.com and 6.1 below the January 79.4 (previously reported at 80.7). This measure of confidence has risen from its interim low of 72.0 in November but remains below its 82.1 interim high in June of last year.
Here is an excerpt from the Conference Board report.
"Consumer confidence declined moderately in February, on concern over the short-term outlook for business conditions, jobs, and earnings," said Lynn Franco, Director of Economic Indicators at The Conference Board. "While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years (April 2008, 81.9). This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead."
Consumers' appraisal of current conditions improved for the fourth consecutive month. Those claiming business conditions are "good" increased to 21.5 percent from 20.8 percent, while those claiming business conditions are "bad" declined to 22.6 percent from 23.4 percent. Consumers' assessment of the labor market also improved. Those claiming jobs are "plentiful" increased to 13.9 percent from 12.5 percent, while those saying jobs are "hard to get" decreased slightly to 32.5 percent from 32.7 percent.
Consumers' expectations, which had been improving over the past two months, retreated in February. The percentage of consumers expecting business conditions to improve over the next six months decreased to 16.3 percent from 17.0 percent, while those anticipating business conditions to worsen increased to 13.3 percent from 12.2 percent. Consumers' outlook for the labor market was also more pessimistic. Those expecting more jobs in the months ahead declined to 13.3 percent from 15.1 percent, while those anticipating fewer jobs increased to 20.6 percent from 19.0 percent. The proportion of consumers expecting their incomes to increase declined from 16.6 percent to 15.4 percent, but those anticipating a decrease in their incomes also declined, from 13.9 percent to 13.1 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 8.7 points above the recession mindset but remains 16.3 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 far 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 78.1 is right at the current regression level of 78.2.
On a percentile basis, the latest reading is at the 30..0 percentile of all the monthly readings since the start of the monthly data series in June 1977 and at the 25.0 percentile (i.e., the top of the lowest quartile divide) 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.
The NFIB index has been less volatile than the Conference Board Consumer Confidence Index.