Consumer Confidence Falls To Lowest Levels Since July

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Includes: RINF
by: Bespoke Investment Group

This morning's report on Consumer Confidence for the month of February was a big disappointment as the headline index came in significantly lower than forecast. While economists were forecasting the headline index to fall slightly from last month's reading of 97.8, the actual reading was five points below forecasts at 92.2. That was the lowest level in Consumer Confidence since last July, bringing the headline index back below its long-term average of 93.4.

Within the report, there were a couple of interesting trends worth highlighting. For starters, the bulk of the weakness in confidence was among middle-income consumers. The chart below shows Consumer Confidence between consumers with incomes between $35K and $50K (middle) and those with incomes greater than $50K (high). Among consumers with middle-incomes, Consumer Confidence fell by 18.6 points (20%) down to 74.7. That is the lowest monthly reading since September 2014 and the largest monthly decline since October 2008. For higher-income consumers, though, confidence barely budged falling from 113.8 down to 112.7. While it's not shown in the chart below, confidence among lower-income consumers (below $35K) also fell significantly more than it did among higher-income consumers, but the decline (~10%+) was not as severe as the drop in confidence among middle-income consumers.

The monthly Consumer Confidence report also asks a number of questions regarding consumers' views on stock prices and interest rates. Regarding the stock market, consumers are pretty bearish. As shown in the chart below, the percentage of consumers looking for higher stock prices dropped to 26.5% and just saw its largest two-month decline since June 2012.

Finally, consumer views towards interest rates are pretty enlightening and provide a case study as to why going with the herd can often get you into trouble as an investor. In last month's report, the percentage of consumers looking for interest rates to fall dropped to its lowest level since March 2000. That low reading was then followed by a huge rally in the treasury market which pushed the yield on the 10-year down to 1.5%!

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