The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through August 15. The 81.5 reading is above the 79.0 forecast by Investing.com and 0.5 points above the July upwardly adjusted 81.0 (previously reported at 80.3). The index is now fractionally off its five-and-a-half year interim high set in June. Or, to put it another way, the index is 9.1 points below the December 2007 level, which the NBER declared as the start of the Great Recession.
Here is an excerpt from the Conference Board report.
Says Lynn Franco, Director of Economic Indicators: "Consumer Confidence increased slightly in August, a result of improving short-term expectations. Consumers were moderately more upbeat about business, job and earning prospects. In fact, income expectations, which had declined sharply earlier this year with the payroll tax hike, have rebounded to their highest level in two and a half years. Consumers' assessment of current business and labor market conditions, on the other hand, was somewhat less favorable than last month."
Consumers' assessment of current conditions moderately declined. Those stating business conditions are "good" decreased to 18.4 percent from 20.8 percent, while those stating business conditions are "bad" was virtually unchanged at 24.8 percent. Consumers' appraisal of the labor market was mixed. Those claiming jobs are "plentiful" decreased to 11.4 percent from 12.3 percent, while those claiming jobs are "hard to get" declined to 33.0 percent from 35.2 percent.
Consumers' expectations, which had retreated in July, increased in August. Those expecting business conditions to improve over the next six months edged up to 20.1 percent from 19.9 percent. Those expecting business conditions to worsen declined slightly to 11.1 percent from 11.3 percent.
Consumers' outlook for the labor market remained upbeat. Those anticipating more jobs in the months ahead increased to 17.6 percent from 16.7 percent, while those anticipating fewer jobs edged down to 17.3 percent from 17.7 percent. The proportion of consumers expecting their incomes to increase improved to 17.4 percent from 15.7 percent. Those expecting a decrease declined slightly to 13.5 percent from 13.7 percent. [press release]
Finally Casting Off the Recessionary Mindset?
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 moves us 12.1 points above the recession mindset.
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 linear 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 81.5 is 3.8% above the current regression level of 78.5.
On a percentile basis, the latest reading is at the 33.4 percentile of all the monthly readings since the start of the monthly data series in June 1977, and at the 28.6 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.
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. It will be interesting to see if the next NFIB release echoes the Conference Board's improvement.