Consumer Confidence and Equity Returns

Businessweek details:

Confidence among U.S. consumers increased more than forecast in January, reaching its highest level in eight months on signs the labor market is improving.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 74 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 71.5. The measure has increased 9.9 points in the last two months, the biggest such gain since April-May 2009.

The Interloper and I have had some discussion regarding consumer confidence and the impact (if any) on forward equity returns. Looking at the data, it became clear that on average consumer confidence is a lagging, rather than leading, indicator for equity returns (great chart here and can be seen in the table below in the average columns).

There does however appear to be pockets of opportunity at extremes.

The table below outlines the average three month forward S&P return against the three-month change in the Michigan Confidence index and the absolute value of the index since 1979. While the data is limited for each "box" (and in some cases, there were no data points), it does show that the S&P 500 has performed very well on a going forward basis when:

• Confidence Levels are low (less than 70) and stabilizing (between -5% and 5%)
• Confidence Levels are high (greater than 85) and slightly falling (-10% to 0%), indicating potential "buying the dips" opportunities

On the other hand, returns were much more volatile at low confidence levels and when confidence fell abruptly.

Note we are currently up 22% in three months to that 74 level, which would indicate stability in equity returns going forward if the table is to be trusted.

Source: Bloomberg

Confidence Upswing Continues

Bloomberg details:

Confidence among U.S. consumers rose in December to the highest level in eight months as an improving job market helped regain all the ground lost following the mid- year government budget battle and credit-rating downgrade.

The Conference Board’s index increased to 64.5, exceeding all estimates in a Bloomberg News survey and the highest since April, from a revised 55.2 reading in November, figures from the New York-based private research group showed today.

Source: Conference Board

Consumer Confidence.... Things Are Looking Up as it Can't Get Much Worse Editition

BusinessWeek details:

Consumer confidence climbed in November by the most in more than eight years as Americans grew more upbeat about employment and income prospects.

The Conference Board’s index increased to 56 from a revised 40.9 reading in October, the biggest monthly gain since April 2003, figures from the New York-based private research group showed today. The gauge, at a four-month high, exceeded the most-optimistic forecast in a Bloomberg News survey of economists.

An improvement (a much stronger than anticipated one at that) is a good thing, but we are bouncing off of extreme lows.

Source: Conference Board

Consumer Uncertainty

Source: Conference Board

Consumer Confidence Smack Down... Jobs Edition

I was just having a conversation with a friend who asked me how retail spending could remain strong (up more than 8% year-over-year through June in nominal terms) , while consumer confidence was taking a dip.

I outlined transfer payments (i.e. unemployment), lower taxes, bifurcation between classes (as he rephrased it, 'the top 10% of income earners have one "vote" each in the confidence measures, but multiple "votes" in the spending category'), and quite frankly that the bounce in year-over-year retail spending hid the fact that in real terms, we were still below pre-crisis (i.e. 2007) levels.

Here's one more thought... the present situation confidence index had been weak, but individuals thought things were going to get better. If August is not just noise, that may no longer be the case.

The devil's advocate in me wants to point out that historically, a large decline (10+ points) in consumer confidence has on average been a great time to buy risk assets as it tends to mark a bottom (see here).

We shall see.

Source: Conference Board

Confidence Improves... Still Poor Jobs Outlook

Source: Conference Board

Consumer Confidence Improves in January

Marktetwatch details:

An index of U.S. consumer confidence jumped to 60.6 in January, reaching the highest level since May, with more consumers optimistic about income and jobs, as well as current business conditions, the Conference Board reported Tuesday.

Note that this does not mean consumers are confident, just that their confidence has improved. Taking a look at the details behind the index we see an improvement across the board, but from very low levels.



Source: Conference Board

Consumers Confident... That They Lack Confidence

Says Lynn Franco, Director of The Conference Board Consumer Research Center:

“September’s pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook. Overall, consumers’ confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months.”

Source: Conference Board

Consumer Confidence Jumps Slightly... Flat Year over Year

The Conference-Board details confidence is just about where it was a year ago (did a recovery actually take place?):

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence posted a modest gain in August, the result of an improvement in consumers’ short-term outlook. Consumers’ assessment of current conditions, however, was less favorable as employment concerns continue to weigh heavily on consumers’ attitudes. Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future. All in all, consumers are about as confident today as they were a year ago (Aug. 2009, 54.5).

July vs. August

Month over Month Change

Consumers Getting Realistic

The Conference Board details:

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Source: Conference Board

Consumer Confidence Crushed

The AP details:

Americans, worried about jobs and the sluggish economic recovery, had another relapse in confidence, causing a widely watched barometer to tumble in June.

The Conference Board, a private research group based in New York, said Tuesday that its Consumer Confidence Index dropped almost 10 points to 52.9, down from the revised 62.7 in May. Economists surveyed by Thomson Reuters had been expecting the reading to dip slightly to 62.8.

June's reading marked the biggest drop since February, when the index fell 10 points. The index had risen for three straight months since then.

Both components of the index — one that measures how consumers feel now about the economy, the other that assesses their outlook over the next six months — dropped. The Present Situation Index decreased to 25.5 in June from 29.8 in May. The Expectations Index declined to 71.2 from 84.6.

Source: Conference Board

Consumer Sentiment Continues to Rise

Marketwatch details:

U.S. consumer sentiment rose in early June, hitting the highest level since January 2008, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index increased to 75.5 in June from 73.6 in May. Economists surveyed by MarketWatch had been expecting the sentiment index to hit 74 in June. The index hit a 30-year low of 55.3 in November 2008.

Source: St. Louis Fed

Federal Debt = Monetary Terrorism

Okay, the title may be an exaggeration, but a recent Gallup Poll (hat tip Naked Capitalism) shows how the concerns over the growing level of federal debt has moved to the forefront and to a similar level by quantity of people (perhaps not level among them) to terrorism. Yves details the opportunity for change this brings:

It would appear the ground has been laid rather effectively for (among other things) an assault on Social Security and Medicare. As we have pointed out before, Social Security is not under any immediate stress, and it would take only some minor tweaks to alleviate the (well off in the future) strains. And contrary to popular perception, the reason Medicare spending will get out of hand is due to projected medical cost escalation, not demographics.

Source: Gallup

Confidence Improves in May

Just getting to some posting, as I took the day off (planned for a few weeks). As today just happened to coincide with the nicest day of the year, I must say that my own outlook is improved.

Speaking of an improved outlook... consumer confidence jumped in May (how is THAT for a segue!). These numbers are still VERY low (less than 5% of those polled see a plentiful job market), but improved none-the-less. To the details (per the Biz Journal):

Consumer confidence has risen again this month, the third-straight month of gains, according to The Conference Board.

The Conference Board Consumer Confidence Index rose to 63.3 in May, compared with 57.7 in April.

“Consumer confidence posted its third consecutive monthly gain, and although still weak by historical levels, appears to be gaining some traction,” Lynn Franco, director of the New York nonprofit’s Consumer Research Center, said in the release.

The base year, 1985, equals 100 in the index.

Source: Conference Board

Consumer Confidence Increases in April

Bloomberg reports:

Confidence among U.S. consumers increased in April to the highest level since September 2008 as Americans became more upbeat about the labor market.

The Conference Board’s confidence index rose more than forecast, to 57.9 from 52.3 in March, according to the New York- based private research group. The median forecast of economists surveyed by Bloomberg News projected a rise to 53.5. A measure of expectations was the highest since 2007.

Pessimism is starting to abate after employers added workers to payrolls in three of the last five months. More job growth will be needed to spark bigger gains in confidence, incomes and spending, which accounts for about 70 percent of the economy.

“Consumers are feeling better about the labor market,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who forecast the index to rise to 57. “If they are to spend more, they need to have jobs.”

Source: Conference Board

Confidence Rebounds... Remains Low

Bloomberg details:

Confidence among U.S. consumers climbed in March as Americans perceived employment was starting to improve.

The Conference Board’s confidence index rose to 52.5, exceeding the median forecast of economists surveyed by Bloomberg News, from 46.4 in February, the private research group’s report showed today. Another report showed home prices rose in January.

“With signs of improvement in the labor market, confidence is more likely to be up than down in the next few months,” said James O’Sullivan, chief economist at MF Global Ltd. in New York, who forecast sentiment would pick up. “It’s still a low level of confidence.”

Source: Conference-Board

Consumer Confidence Collapses

The Conference Board detailed the poor confidence reading (both present and future) this morning:

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer Confidence, which had been improving over the past few months, declined sharply in February. Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5).

Consumers' short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."

Source: Conference Board

Consumer Confidence Ticks Higher

Reuters details:

U.S. consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November home prices, giving a mixed picture of the economic recovery.

The Conference Board, an industry group, reported on Tuesday that consumer confidence rose for the third straight month in January, driven by improved economic conditions.

Its index of consumer attitudes rose to 55.9 in January, the highest reading since September 2008 and up from an upwardly revised 53.6 in December. The index topped the median forecast from analysts polled by Reuters for a reading of 53.5.

Source: Conference Board

Consumers Don't Enjoy Unemployment

Bloomberg details:

Confidence among U.S. consumers unexpectedly fell in November for the second consecutive month as surging unemployment shook households.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66 from 70.6 in October. The gauge was projected to rise, according to the median forecast in a Bloomberg News survey of economists.

A jobless rate that jumped to a 26-year high last month and is projected to remain above 10 percent through the first half of next year is weighing on Americans as they head into the holiday shopping season. Macy’s Inc. is among retailers showing a decline in sales as consumers spend only on essentials such as food and clothing.

Source: St. Louis Fed

Consumer (Lack of) Confidence

The Conference Board details:

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment. In fact, the Present Situation Index is now at its lowest reading in 26 years (Index 17.5, Feb. 1983). The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead. Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays."

Source: Conference Board