Consumer Confidence Trends

U.S. consumers, it appears, are in the summer doldrums.

Gallup says its U.S. Economic Confidence Index remained at -16 last week – the third straight week at that level. The index dropped to -13 at the start of June, them dipped to -16 in the middle of the month, and has not moved since.

Dimming outlook

Currently, one in five consumers (20%) say the economy is excellent or good, while 33% say it's poor -- resulting in a current conditions index of -13. As for the economy's future, 38% say it's getting better, while 56% say things are getting worse, for an economic outlook score of -18 -- the same as the previous week's score.

The recent slight dip in the overall index is attributable to losses in the outlook component since early June, while consumer attitudes about current economic conditions have held steady. This punctuates the pattern seen throughout 2014, with consumers' perceptions of the current state of the economy inching higher -- now up five points from -18 at the start of January -- while their outlook for the economy has gone in the other direction -- falling 10 points from -8.

Steady, but gloomy

Consumers' overall confidence in the economy has been relatively steady all year, and that has continued over the last three weeks, with confidence consistently at -16. This stability, however, masks the good news that perceptions of current conditions have improved, and are now approaching their highest level in five years. However, pessimism about the economy's direction is mounting, and is keeping the overall index from climbing any higher.

Even last week's promising jobs report and stock market highs couldn't lift consumers' confidence, suggesting stability may be in the forecast for the foreseeable future. Meanwhile, gas prices, which now top $4 in some states, could have prevented any potential gains in confidence.

The index

The Economic Confidence Index is the average of two components: Consumers' views on the current economic situation and their perceptions of whether the economy is getting better or worse.

The potential high is 100, if all were to say the economy is "excellent" or "good" and that it is getting better; the potential low is -100, if all were to say the economy is "poor" and getting worse.

Since January 2008, when Gallup began tracking economic confidence daily, the weekly averages have ranged from -65 in October 2008 to -3 in May and June 2013.

There's a lot of talk about a financial recovery but for many Americans, that's all it is -- talk. So says the Consumer Reports Index, an overall measure of Americans’ personal financial health, which found that Americans reported a sharp rise in financial difficulties and a weaker view of their overall financial health in the past 30 days.

“The economy is staggering along. This recovery remains the weakest since World War II. Uncertainty hangs over the lower-income consumers like a veil of smoke fed by the lackluster recovery in jobs, “said Ed Farrell, director of consumer insight at Consumer Reports.

The Consumer Reports Index’s trouble tracker climbed to 46.0 in August from 34.7 the prior month. This significant rise was driven by a surge in financial troubles among lower-income consumers (households earning $50,000 or less) and Americans with a high school education or less.

The trouble tracker measure addresses both the proportion of consumers that have faced difficulties as well as the number of hurdles they have encountered.  Affluent and college-educated consumers showed little change in the amount of financial trouble they faced in the past 30 days.

It flows downhill

Lower-income households continue to be disproportionately affected by the economy’s crawling recovery. Twenty-seven percent of them reported they were unable to afford medical bills or medications in the past 30 days—that’s 11 percentage points higher than the national average. Missed bill payments and lost or reduced healthcare coverage also remain among the most prevalently reported financial troubles overall.  
 
The Consumer Reports Index’s sentiment measure dropped into negative territory for the first time in five months, falling to 48.6 from 50.8 the prior month. After three straight months of decline, sentiment is at its lowest level since October 2012. The greatest decline in sentiment was also among lower-income households and those that have a high school education or less.

The level of stress that consumers felt was up from the prior month, 58.0 versus 53.7, respectively. The most stressed Americans: women (59.6), those in households earning under $50,000 (62.0), aged 35-64 (60.9), and those in the Northeast (61.5).

The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults.

Consumers appear to have become a bit wobbly about the economy in September.

According to The Conference Board, its Consumer Confidence Index, slipped this month after showing some strength in August. It now stands at 79.7 – a drop of just over two points from its reading of 81.8 the previous month. The Present Situation Index grew to 73.2 from 70.9, while the Expectations Index fell to 84.1 from 89.0 last month.

“Consumer Confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed,” said Lynn Franco, director of Economic Indicators. “Consumers’ assessment of current business and labor market conditions, however, was more positive. While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead.”

How they see it

Consumers’ appraisal of present-day conditions improved moderately. Those who say business conditions are “good” increased to 19.5% from 18.7%, while those who think conditions are “bad” fell to 23.9% from 24.5$.

Consumers’ assessment of the labor market also was more favorable. Those who believe jobs are “plentiful” inched up to 11.5% from 11.3%, while those saying jobs are “hard to get” fell to a five-year low of 32.7% from 33.3%.

Consumers’ expectations, which had increased in August, declined in September. The percentage of consumers expecting business conditions to improve over the next six months edged up to 20.9% from 20.6%, while those expecting business conditions to worsen was virtually unchanged at 11.0%.

Consumers’ outlook for the labor market, however, grew more pessimistic. Those anticipating more jobs in the months ahead dropped to 16.9% from 17.5%, while those anticipating fewer jobs increased to 19.7% from 17.2%. The proportion of consumers expecting their incomes to increase declined to 15.4% from 17.5%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was September 13.

The government shutdown earlier this month, along with jitters about the debt ceiling, took a toll on the way consumers viewed the economy.

The Conference Board says its Consumer Confidence Index fell sharply in October on the heels of September's moderate decline. The Index now stands at 71.2 -- down 9 points from where it stood last month. The Present Situation Index decreased to 70.7 from 73.5, while the Expectations Index fell to 71.5 from 84.7 last month.

“Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations,” said Lynn Franco, director of economic indicators at The Conference Board. “Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in 1995/1996. However, given the temporary nature of the current resolution, confidence is likely to remain volatile for the next several months.”

How they see it

Consumers’ assessment of current conditions declined moderately. Those who think business conditions are “good” decreased to 19.0% from 20.7%, while those claiming business conditions are “bad” edged down to 23.0% from 23.9%.

Consumers’ appraisal of the job market was less favorable than last month. Those saying jobs are “plentiful” was virtually unchanged at 11.3%, while those saying jobs are “hard to get” jumped to 35.8% from 33.6%.

Consumers’ expectations, which had softened in September, plunged in October. Those expecting business conditions to improve over the next six months fell to 16.0% from 20.6%, while those expecting business conditions to worsen increased to 17.5% from 10.3%.

There was also more pessimism about the outlook for the labor market. Those anticipating more jobs in the months ahead decreased to 15.3% from 16.1%, while those anticipating fewer jobs increased to 22.7% from 19.1%. The proportion of consumers expecting their incomes to increase rose to 15.8% from 15.1%. However, those expecting a decrease rose to 15.4% from 13.9%.

The monthly Consumer Confidence Survey is conducted for The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was October 17.

Heading into the holiday -- which is to say shopping -- season, consumers have a dimmer view of the economy.

The Conference Board reports its Consumer Confidence Index declined in November following a sharp 9-point decrease the month before. The Index now stands at 70.4 -- a 2-point drop from October. The Present Situation Index edged down to 72.0 from 72.6, while the Expectations Index slipped to 69.3 from 72.2 last month.

“Sentiment regarding current conditions was mixed, with consumers saying the job market had strengthened, while economic conditions had slowed,” said Lynn Franco, the Board's director of economic indicators. “However, these sentiments did not carry over into the short-term outlook. When looking ahead six months, consumers expressed greater concern about future job and earning prospects, but remain neutral about economic conditions. All in all, with such uncertainty prevailing, this could be a challenging holiday season for retailers.”

Ebb and flow

Consumers’ assessment of overall current conditions decreased slightly. Those claiming business conditions are “good” edged up to 19.9% from 19.5%, while those claiming business conditions are “bad” increased to 25.2% from 23.0%.

Consumers’ appraisal of the job market was little changed. Those saying jobs are “plentiful” ticked up 0.2% -- to 11.8%, while those saying jobs are “hard to get” decreased to 34.0% from 34.9%.

Consumers’ expectations, which had decreased sharply in October, declined further in November. Those expecting business conditions to improve over the next six months increased slightly to 16.6% from 16.0%, while those expecting business conditions to worsen fell to 16.8% from 17.5%.

Jobs concerns

However, consumers’ outlook for the labor market was more pessimistic. Those anticipating more jobs in the months ahead fell to 12.7% from 16.0%, but those anticipating fewer jobs also decreased 0.9% -- to 21.7%. The proportion of consumers expecting their incomes to increase declined to 14.9% from 15.7%. Those expecting their incomes to drop rose slightly to 15.9% from 15.5%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was November 15.

What a difference a month makes.

After posting a 2-point decline in November -- to 72.0, The Conference Board's Consumer Confidence Index shot up more than 6 points in December and now stands at 78.1. The Present Situation Index rose to 76.2 from 73.5, while the Expectations Index jumped to 79.4 from 71.1 last month.

The rebound in consumer confidence in December put the index close to pre-government shutdown levels (September 2013, 80.2). “Sentiment regarding current conditions increased to a 5 ½ year high (April 2008, 81.9), with consumers attributing the improvement to more favorable economic and labor market conditions,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Looking ahead, consumers expressed a greater degree of confidence in future economic and job prospects, but were moderately more pessimistic about their earning prospects. Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began.”

How they see it

Consumers’ appraisal of overall current conditions improved. Those claiming business conditions are “good” edged down to 19.6% from 20.4%; however, those who think business conditions are “bad” decreased to 22.6% from 24.6%t. Appraisal of the job market was also more upbeat. Those saying jobs are “plentiful” ticked up to 12.2% from 12.0%, while those saying jobs are “hard to get” dipped 1.6% -- to 32.5%.

Consumers’ expectations, which had decreased in November, improved in December. The percentage of consumers expecting business conditions to improve over the next six months increased to 17.2% from 16.7%, and those expecting business conditions to worsen fell to 14.0% from 16.1%.

The outlook for the labor market was considerably more optimistic. Those anticipating more jobs in the months ahead jumped 4% -- to 17.1%, while those anticipating fewer jobs decreased to 19.0% from 21.4%. The proportion of consumers expecting their incomes to increase, on the other hand, was down 1.4% to 13.9%; while those expecting a their incomes to fall declined to 14.0% from 15.5%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was December 17.

Not much movement in the Deloitte Consumer Spending Index during July. In fact, the Index was effectively unchanged in during that month and was relatively flat over the past three months. The Index tracks consumer cash flow as an indicator of future consumer spending.

“There were only small movements among the key components of the Index to drive a change in consumers’ spending plans,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Home prices dipped slightly, and real wages grew at a slower pace compared with the last 12 months. On a positive note, the tax rate declined slightly. Despite some fluctuation recently, unemployment insurance claims are still hovering in the 300,000 range.”

The Index, which is made up of 4 components -- tax burden, initial unemployment claims, real wages and real home prices – fell to 3.56 from 3.74 in June.

Consumer uncertainty

Continued economic fluctuations in areas such as housing and unemployment are cited as the main reasons that consumers are still hesitant to spend robustly. “Aside from a slow economic recovery, we’ve seen other factors challenging retailers -- particularly in our just released back-to-school and back-to-college studies,” said Alison Paul, vice chairman of Deloitte, and retail and distribution sector leader.

“Consumers” she added, “are planning to shop smarter, often buying items on a just as-needed basis. As a result, the traditionally anticipated back-to-school shopping trip is not the event it once was. The convenience of 24/7 online access allows parents -- and students -- to shop any time, not just during the traditional mid- to late-summer back-to-school period.”

Given these factors, Paul says retailers need to remain sharp by making their merchandise and offers extremely attractive to finish the back-to-school season strong.

Index highlights

• Tax burden: The tax rate continues a steady hold at 11.7%t showing a marginal decrease from prior month.
• Initial unemployment claims: Claims rose slightly this month to 315,000, but are still down 8.3% from the same period last year.
• Real wages: Real hourly wages dropped slightly to $8.79 this month, but remain at a higher level compared with the past 12 months.
• Real median new home price: New home prices continue to fluctuate, falling 3.5% from the prior month to $115,000.

In what may be a sign of better things to come, the Deloitte Consumer Spending Index (Index) picked up in August. The Index tracks consumer cash flow as an indicator of future consumer spending.

“A notable decrease in initial unemployment insurance claims helped push the Index up,” said Deloitte Senior U.S. Economist Daniel Bachman. “An improving labor market can be a boon to consumer confidence. If these trends continue, there is a strong likelihood that we could see an acceleration of economic growth in the latter part of the year.”

The Index, which ecompasses 4 components -- tax burden, initial unemployment claims, real wages and real home prices -- increased to 3.96 this month from 3.70 last month.

“The uptick in the Index suggests optimism as retailers anticipate the all important holiday shopping season,” said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. “These economic fundamentals along with lower gas prices may encourage consumers to pick up their spending in the months ahead.”

Retailers, Paul said, should take a closer look at inventory with this optimism in mind to get an early read on what’s hot -- both in store and online, in case they need to pull some last minute levers to replenish merchandise. “Retailers should also assess their cyber security levels as attackers may be especially motivated to be more aggressive during peak periods like the holiday season,” Paul continued, adding, “retailers will not only need to be vigilant about suspicious activity, but prepared to quickly address and recover from any incidents.”

Index highlights

• Tax burden: The tax rate continues a steady hold at 11.7%, showing a marginal increase from the prior month.
• Initial unemployment claims: Claims decreased notably to 296,000, and furthermore were down 10.5% from the same period last year.
• Real Wages: Real hourly wages increased slightly to $8.80 and were up a slight 0.3% up from the same period last year.
• Real median new home price: New home prices continue to fluctuate as they fell 3.% from the prior month -- to $113,000.

After posting an increase in August, the Conference Board's Consumer Confidence Index slumped in September, dropping from 93.4 to 80.6.

In addition, the Present Situation Index fell to 89.4 from 93.9, and the Expectations Index dropped more than 9 points -- to 83.7.

The September retreat came after 4 consecutive months of improvement.

“A less positive assessment of the current job market, most likely due to the recent softening in growth, was the sole reason for the decline in consumers’ assessment of present-day conditions,” said Lynn Franco, director of economic indicators at The Conference Board. “Looking ahead, consumers were less confident about the short-term outlook for the economy and labor market, and somewhat mixed regarding their future earnings potential. All told, consumers expect economic growth to ease in the months ahead.”

Not a lot of optimism

Consumers assessed current conditions less favorably in September versus a month ago. Their view of business conditions was virtually unchanged, with those saying conditions are “good” falliung slightly from 23.5 to 23.4%; those who think business conditions are “bad” held constant at 21.3%.

Consumers’ appraisal of the job market declined more appreciably, with the proportion stating jobs are “plentiful” dropped from 17.6% to 15.1%. Those who believe jobs are “hard to get” was barely changed, at 30.1% versus 30.0 percent in August.

Consumers’ optimism about the short-term outlook declined considerably in September. The percentage of consumers expecting business conditions to improve over the next 6 months fell from 20.8% to 18.6%, while those expecting business conditions to worsen rose from 9.9% to 12.0%.

The outlook for the labor market likewise took a downturn. Those anticipating more jobs in the months ahead fell from 17.8% to 15.2%, while those expecting fewer jobs rose from 15.2% to 17.8%.

The proportion of consumers looking for their incomes to grow rose in September to 16.8%, from 15.5% in August. However, the proportion expecting a drop in income also rose -- to 13.4% from 11.6% a month ago.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was September 18.

Self-reports of spending by U.S. consumers dropped to an average of $87 in September -- a decline of $7 from both July and August. At the same time, though, the report by Gallup found spending last month was $3 higher than it was last year.

These findings are based on daily tracking interviews with more than 14,000 consumers, who were asked to report the total amount they spent "yesterday" in stores, gas stations, restaurants, or online -- not counting home and vehicle purchases, or normal monthly bills -- giving an indication of their discretionary spending.

Nothing to see here

The drop in spending Gallup found in September is not unusual. Since 2010, spending has dropped each year from August and September, although the size of the drop has varied. The consistent declines may be the result of increased spending in August on back-to-school purchases and summer vacations.

September's $7 drop in average spending is comparable with past August-to-September drops. Last year, the drop was $11 -- from $95 in August to $84 in September.

Monthly averages in self-reported spending so far in 2014 have generally exceeded average spending for the corresponding month in 2013, and especially so for 2009 to 2012, when averages were generally in the $60 to $70 range. However, this year's monthly averages are still lower than the nearly $100 averages seen in 2008.

Affluent consumers pull back

Daily self-reports of spending among upper-income consumers (those with annual household incomes of $90,000 a year or more) fell last month for the second month in a row -- to average $140 a day -- well below the 12-month high of $190 in July, and near February's 12-month low of $135.

Spending among middle- and lower-income consumers -- which tends to be much more stable -- dropped only slightly -- from $80 in August to an average of $77 in September. Reported spending among this group in the past 12 months has fallen into the narrow range of $84 (in December 2013) to $69 (in January 2014).

What’s it mean?

While consumers' average self-reported daily spending dropped in September, decreases from August to September are common, and average September spending this year exceeded September spending last year. With consumer spending a major driver of the U.S. economy, changes in average spending can reflect how the economy is doing.

Spending has generally increased since 2010, during the aftermath of the recession. And, compared with September 2013, spending increased this September. However, the consecutive two-month drop in spending among upper-income consumers could be a troubling sign, as this group generally has higher discretionary spending than those in the middle- and lower-income brackets.

Consumers are earning more money -- and spending it.

According to the Deloitte Consumer Spending Index, which tracks consumer cash flow as an indicator of future consumer spending, consumer outlays were higher in September for a second straight month.

The index, which is made up of 4 components -- tax burden, initial unemployment claims, real wages and real home prices -- increased to 4.21 from 4.11 in August.

“A rise in real wages boosted the index this month,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Although unemployment claims remain at the level of the previous month, seeing them continue to hover around the 300,000 mark is a positive sign for the labor market.

“The uptick in wages -- although only of one month’s duration -- is also consistent with the improving labor market,” he continued. “If employment and wages continue this positive trajectory, consumers are likely to respond with more confidence and higher spending.”

Index highlights

• Tax burden: The tax rate has been effectively unchanged with a marginal increase to 11.8%.
• Initial unemployment claims: Claims were back over the 300,000 mark to 303,000, but still were down 10.3% from the same period last year.
• Real wages: Real hourly wages were up 0.5% from the previous month as well as the same period last year -- increasing to $8.86 in September.
• Real median new home price: New home prices fell 1.4% from the prior month to $116,000, but prices are still 5.9% higher than the same period last year.

Looking ahead

Steady economic improvements influencing consumer spending point to a more optimistic outlook for the year-end shopping season. “With the holidays beginning, an economy on a more even keel will be a welcome sign for retailers,” said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. “Deloitte is forecasting a 4 to 4.5% increase in overall holiday sales this year, as consumers’ spending levels are likely to increase on the heels of personal income, job and stock market gains. Holiday cheer may be making a comeback as families look to release pent-up demand and regain confidence in the economy.”

After increasing in December, The Conference Board's Consumer Confidence Index was up moderately again in January, rising 1.8 points to 98.1. While the Present Situation Index was unchanged at 116.4, the Expectations Index advanced from 83.0 to 85.9.

“Consumers’ assessment of current conditions held steady, while their expectations for the next six months improved moderately,” said Conference Board Director of Economic Indicators Lynn Franco. “For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy.”

Little change seen in attitudes

Consumers’ appraisal of current conditions was relatively flat in January. The percentage saying business conditions are “good” was virtually unchanged at 27.2%, while those who said business conditions are “bad” declined slightly from 18.9% to 18.5%.

Their assessment of the labor market was modestly more positive. The proportion who see jobs as “plentiful” fell from 24.2% to 22.8%, while those who think jobs are “hard to get” dipped to 23.4% from 24.5%.

Optimism about the short-term outlook improved somewhat. The percentage of consumers expecting business conditions to get better over the next six months rose from 14.5% to 16.2%, while those expecting them to worsen edged down from 10.8% to 10.3%.

The outlook for the labor market was also slightly more optimistic. Those anticipating more jobs in the months ahead increased from 12.4% to 13.2%, while those expecting fewer jobs dropped slightly from 16.8% to 16.5%.

The proportion of consumers looking for their incomes to increase improved from 16.3% to 18.1%. However, the proportion expecting a reduction in income also increased -- from 9.5% to 10.8%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was January 14.