Consumer Confidence Trends

After posting a moderate gain in September, The Conference Board Consumer Confidence Index retreated this month.

The index now stands at 97.6, a loss of five points from the previous month, while the Present Situation Index fell from 120.3 to 112.1, and the Expectations Index edged down to 88.0 from 90.8 in September.

“Consumers were less positive in their assessment of present-day conditions, in particular the job market, and were moderately less optimistic about the short-term outlook,” said Conference Board Director of Economic Indicators Lynn Franco, adding, “despite the decline, consumers still rate current conditions favorably, but they do not anticipate the economy strengthening much in the near-term.”

Consumers' appraisal

Consumers’ view of current conditions was somewhat less positive in October. Those saying business conditions are “good” dipped from 28.1% to 26.5%, while those who see conditions as “bad” rose from 16.4% to 18.3%. Respondents were also less upbeat about the job market. Those who think jobs are “plentiful” decreased from 24.8% to 22.2%, while those who believe jobs are “hard to get” edged up to 25.8% from 24.9%.

Optimism about the short-term outlook was more subdued in October. The percentage of consumers expecting business conditions to improve over the next six months was unchanged at 18.1%, while those who said business conditions will worsen inched up to 10.6% from 10.4%.

Consumers’ outlook for the labor market was slightly less optimistic. Those anticipating more jobs in the months ahead declined from 14.9% to 14.5%, while those expecting fewer jobs rose from 15.9% to 16.9%. The proportion of consumers expecting their incomes to rise slipped from 18.7% to 18.0%, while the proportion who believe there will be a decline increased from 9.9% to 10.7%.

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 October 15.

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.

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 a solid increase a month earlier, The Conference Board's Consumer Confidence Index moved sharply higher in March.

The index shot up 9.5 points to 125.6, with the Present Situation Index moving from 134.4 to 143.1 and the expectations Index increasing to 113.8 from 103.9 last month.

The index now stands at its highest point since December 2000.

“Consumers’ assessment of current business and labor market conditions improved considerably,” said Conference Board Director of Economic Indicators Lynn Franco. “Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects.”

“Thus,” she added, “consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”

Consumer perceptions

The appraisal by consumers of current conditions improved considerably in March. The percentage saying business conditions are “good” increased from 28.3% to 32.2%, while those who said they are “bad” fell to 12.9% from 13.4 percent.

Consumers’ assessment of the labor market was also more positive, as the proportion of consumers who think jobs are “plentiful” rose from 26.9% to 31.7%; those who believe jobs are “hard to get” slipped from 19.9% to 19.5%.

There also was significantly more optimism about the short-term outlook. More than 27% of consumers expect business conditions to improve over the next six months -- up more than 3% from February, while those expecting conditions to worsen dropped from 10.5% to 8.4%.

Consumers’ outlook for the labor market also was more upbeat. The proportion expecting more jobs in the months ahead increased from 20.9% to 24.8%, while those anticipating fewer jobs declined from 13.6% to 12.2%.

The percentage of consumers expecting their incomes to increase improved to 21.5% from 19.2%, while the proportion looking for a decrease dropped from 8.1% to 7.0%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen around what consumers buy and watch. The cutoff date for the preliminary results was March 16.