Consumer Confidence Rebounds in August - Update
The Conference Board Consumer Confidence Index increased in August 2010, reversing two straight months of decline, which in turn followed three consecutive months of improvement.
Last month, the Index rose moderately from 51 to 53.5. In July 2010, the Index fell from 54.3 to 51, a less severe drop than June 2010’s decline from 62.7. An improvement in consumers’ short-term outlook drove the overall increase in the Index, even as their assessment of current conditions declined.
Consumers Take Dim View of Current Condition
Although the May 2010 Present Situation Index stood at a low score of 29.5, it was still an improvement from 28.2 the previous month. In June 2010, the Present Situation Index slumped to 26.8, and then fell further to 26.4 in July and 24.9 in August.
Consumers’ appraisal of current conditions continued to weaken in August. Those claiming business conditions are “good” decreased to 8.7% from 8.8%. However, those stating business conditions are “bad” declined to 41.9% from 43.3%. Consumers’ assessment of the labor market deteriorated further, as well. Those saying jobs are “hard to get” increased to 45.7% from 45.1%, while those claiming jobs are “plentiful” declined to 3.8% from 4.4%.
Consumer Optimism about Future Picks Up
Consumers’ short-term future outlook rebounded a bit in August. The Expectations Index increased to 72.5 from 67.5 in July, although it remains down from 72.7 in June.
Those anticipating an improvement in business conditions over the next six months increased to 17% from 15.8%, while those anticipating conditions will worsen declined to 13.4% from 15.3%.
Consumers were also slightly less pessimistic about future employment prospects. Those expecting more jobs in the months ahead increased to 14.6% from 14.2%, while those anticipating fewer jobs decreased to 19.4% from 20.9%. The proportion of consumers expecting an increase in their incomes held steady at 10.6%.
“Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future,” said Lynn Franco, director of The Conference Board Consumer Research Center. The August 2010 Consumer Confidence Index score is similar to what it was in August 2009 (54.5).
LEI Seesaws
Another recent forward-looking Conference Board consumer index also offers a slightly more optimistic signal on where consumer economic behavior is heading in 2010. The Conference Board’s most recent Leading Economic Index (LEI) showed a 0.1% increase [pdf], following a mild decline in June 2010, slight improvement in May 2010, and flat performance in April 2010, which snapped 12 straight months of growth. In June 2010, the LEI dropped 0.3%.
The LEI, which measures economic activity for the next six months, rose from 109.7 to 109.8. Between January and July 2010, the LEI rose 2%, slightly slower than the increase of 2.6% for the December 2009-June 2010 period. The LEI declined for 20 straight months before increasing every month between April 2009 and March 2010.
Ataman Ozyildirim, economist at The Conference Board, said the economy should continue expanding slowly. “The LEI is growing at its slowest pace since mid-2009 and it has been essentially flat since March,” said Ozyildirim. “However, the index is still well above pre-recession levels and the CEI remains on a rising trend that began in late 2009. All four coincident indicators have risen over the last six months, with July’s gain in industrial production offsetting the recent weakness in employment.”
CEI Slightly Improves
The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.2% to 101.4, following a 0.1% decline in June and a 0.4% increase in May.
LEI Breakdown
The LEI is a composite of 10 U.S. economic indices:
- Average weekly hours, manufacturing.
- Average weekly initial claims for unemployment insurance.
- Manufacturers’ new orders, consumer goods and materials.
- Index of supplier deliveries – vendor performance.
- Manufacturers’ new orders, nondefense capital goods.
- Building permits, new private housing units.
- Stock prices, 500 common stocks.
- Money supply.
- Interest rate spread, 10-year Treasury bonds less federal funds.
- Index of consumer expectations.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. The cutoff date for August’s preliminary results was August 24, 2010.