Tuesday, January 25, 2011

USA Consumer Confidence at 8-Month High! (Chart) "Consumers have begun the year in better spirits"


The Conference Board: Monthly Consumer Confidence Index

USA Monthly Consumer Confidence Index at 8-Month High in January

Official Statement by The Conference Board The Conference Board Consumer Confidence Index®, which had dipped in December, increased in January. The Index now stands at 60.6 (1985=100), up from 53.3 in December. The Present Situation Index improved to 31.0 from 24.9. The Expectations Index increased to 80.3 from 72.3 last month. Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumers have begun the year in better spirits. As a result, the Index is now near levels not seen since last spring (May 2010, Index 62.7). Consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. Income expectations are also more positive. Although pessimists still outnumber optimists, the gap has narrowed.”

Cycle History The current Consumer Confidence Index (CCI) in January of 60.6 (preliminary) is down -51.3 and -46% from the cyclical peak of 111.9 in July 2007. The current CCI is up +35.3 and +140% from the Great Recession cyclical bottom of 25.3 in February 2009. Therefore, the CCI continues closer to the cyclical low than to the high.

Trend The current trend is now positive from the recent low of 48.6 in September. The January CCI of 60.6 (preliminary) is now above the ascending 12-month moving average of 53.7. The  current CCI is above the slightly ascending 24-month moving average of 50.3 and has been for 11 consecutive months. The current CCI continues above the 36-month moving average of 51.4 for the 3rd consecutive month, after being below the prior 5 consecutive months. (The 12-month, 24-month, and 36-month moving averages charts are not shown on this page).

Monthly Consumer Confidence Index (Chart) Below is a chart of the past 43 months of The Conference Board CCI (preliminary) from the July 2007 cyclical high of 111.9 through the latest month reported, January 2011. As can be seen, the CCI bottomed at a Great Recession cyclical low in February 2009 and the Great Recession officially ended in June 2009. After a peak in May 2010 of 62.7, the CCI has been in a range from a low of 48.6 in September 2010 to a high of 54.3 in November 2010. The current CCI of 60.6 (preliminary) continues above the recent lows of 48.6 in September 2010 and 46.4 in February 2010.

Commentary The January 2011 Consumer Confidence is a surprising and huge increase. The monthly increase of +7.1 (preliminary)  is the largest since August 2009 (+7.1) and May 2009 (+14.3). At 60.6, the CCI is the highest since May 2010 (62.7), at an 8-month high. The CCI continues well above the recent lows of 48.6 in September 2010 and 46.4 in February 2010.

In contrast, Thomson Reuters/University of Michigan's January 2011 reading on consumer sentiment dropped [ USA Consumer Sentiment Drops in January (Charts) *Rising gasoline prices dampen mood* ].  Also, the daily Gallup Economic Confidence Index is at a 3-year high. Dennis Jacobe, Gallup Chief Economist attributes this increased optimism to "It may be that the start of a new year, the more cooperative tone in Washington, the continued gains on Wall Street, the Federal Reserve's continuing efforts to stimulate the economy, and the extension of the Bush tax cuts late last year have combined to make all Americans - and particularly upper-income Americans - more optimistic about the U.S. economy. Confidence is also up despite fears of continued financial problems in Europe, inflation problems in Asia, and state and local financial problems as well as housing issues in the U.S."

Therefore, the upturn in the Consumer Confidence Index is more a short-term and possibly intermediate-term change in trend for the time being. The CCI continues closer to the cyclical low of 25.3 in February 2009 than the cyclical high of 111.9 in July 2007, as evidenced by the above chart.

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*Data courtesy of The Conference Board*

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