Consumer Confidence Bounces Back After Three Straight Monthly Declines
The Conference Board's Consumer Confidence Index® bounced back in November following three straight monthly declines. The index increased to 102.0 from October's downwardly revised reading of 99.1. This month's reading was better than expected, exceeding the 101.0 forecast.
The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, inched down to 138.2 in November from 138.6 in October. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, rose to 77.8 in November from 72.7 in October. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.
“Consumer confidence increased in November, following three consecutive months of decline,” said Dana Peterson, Chief Economist at The Conference Board. “This improvement reflected a recovery in the Expectations Index, while the Present Situation Index was largely unchanged. November’s increase in consumer confidence was concentrated primarily among householders aged 55 and up; by contrast, confidence among householders aged 35-54 declined slightly. General improvements were seen across the spectrum of income groups surveyed in November. Nonetheless, write-in responses revealed consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates.”
Peterson added: “Assessments of the present situation ticked down in November, driven by less optimistic views on current job availability, which outweighed slightly improved views on the state of business conditions. More consumers said that business conditions were ‘good’ compared to last month, but more also said they were ‘bad.’ Regarding the employment situation, more consumers said that jobs were ‘plentiful’ compared to October, but the number saying jobs were ‘hard to get’ also increased. By contrast, when asked to assess their current family financial conditions (a measure not included in calculating the Present Situation Index), the share reporting ‘good’ rose, and those citing ‘bad’ fell, suggesting consumer finances remain healthy heading into the holiday season.”
“Consumer expectations for the next six months recovered in November, reflecting improved confidence about future business conditions, job availability, and incomes. Compared to last month, expectations that interest rates will rise in the year ahead ticked down, but consumers’ outlook for stock prices continued to weaken in November. Meanwhile, average 12-month inflation expectations receded back to 5.7 percent after a one-month uptick to 5.9 percent. Consumers’ views of their expected family financial situation, six months hence (not included in calculating the Expectations Index) recovered in November, after ticking down for the past two months. Buying plans for autos, homes, and big-ticket appliances trended downward on a six-month basis—perhaps reflecting the impact of elevated interest rates.”
Background on the Consumer Confidence Index
The Conference Board Consumer Confidence Index measures the consumers attitudes and confidence in the economy, business conditions, and labor market, with higher readings indicating higher optimism. The general assumption is that when consumers are more optimistic they will spend more and stimulate economic growth. However, if consumers are pessimistic then spending will decline and the economy may slow down. The index is based on a 5 question survey, with 2 questions related to present conditions and 3 questions related to future expectations. The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977, which is where our data begins.