Consumer Confidence Up in June 2017

Included at the end of this write up is the official news release from the Conference Board.

In June, the 3MMA of the composite decreased from 120.6 to 118.6 (Figure 1).

We prefer to smooth the data with a moving average because of monthly volatility, which in the case of consumer confidence has been quite extreme since the beginning of last year. The composite index is made up of two sub-indexes. These are the consumer’s view of the present situation and his/her expectations for the future. Both are now above their eight year trend line (Figure 1). The historical pattern of the 3MMA of the composite, the view of the present situation and expectations are shown in Figure 2.

All three measures are now higher than they were at the pre-recession peak of 2007. The 3MMA of the composite made no progress from early 2015 through mid 2016 as improvements in the consumer’s view of the present situation were negated by a decline in expectations. Since mid 2016 both components of the index have surged. Comparing June 2017 with June 2016, the 3MMA of the composite was up by 23.8, the present situation was up by 26.9 and expectations were up by 21.8 (Table 1).

All sub indices in Table 1 were green in April, May and June. The consumer confidence report includes encouraging data on job availability and wage expectations. It reports on the proportion of people who find that jobs are hard to get and those who believe jobs are plentiful and it measures those who expect a wage increase or a decrease. Since August 2011 both of the employment components have steadily improved. Expectations for wage increases have not been as consistent, but the differential between those expecting an increase and those expecting a decrease since and including last December has been the best since before the recession. Compared to year ago results, plans to buy a house were negative in January through March but became positive in April through June. Plans to buy a car have been positive every month since September last year. Plans to buy an appliance have also been positive every month since last September.

Economy.com summarized as follows: “Consumer confidence made a modest recovery in June, and overall confidence remains well elevated. Sentiment around the current economic situation is quite favorable, with the present situations index now several points above the pre-recession peak and only bested by the reading from the late 1990s. Expectations are more muted, having fallen for three months in a row. Business expectations have declined considerably from their March high since it has become increasingly clear that major tax reforms and infrastructure spending will not be coming nearly as quickly or easily as respondents initially believed. Confidence in job availability has softened from its March high, but consumers are still relatively confident in their future earning potential.”

Our take is slightly different from both Economy.com and the official news release included below because we consider only three-month averages and the other summaries report monthly numbers.

SMU Comment: Consumer confidence continues to be historically positive, both the view of the present situation and expectations. The employment sub indexes are good, which will drive personal consumption, the largest component of GDP. This is turn will have a positive effect on steel consumption.

The official news release reads as follows:

The Conference Board Consumer Confidence Index Increased in June

The Conference Board Consumer Confidence Index®, which had decreased in May, increased moderately in June. The Index now stands at 118.9 (1985=100), up from 117.6 in May. The Present Situation Index increased from 140.6 to 146.3, while the Expectations Index declined from 102.3 last month to 100.6.

“Consumer confidence increased moderately in June following a small decline in May,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved to a nearly 16-year high (July 2001, 151.3). Expectations for the short-term have eased somewhat, but are still upbeat. Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.”

Consumers’ appraisal of current conditions improved in June. Those saying business conditions are “good” increased from 29.8 percent to 30.8 percent, while those saying business conditions are “bad” declined from 13.9 percent to 12.7 percent. Consumers’ assessment of the labor market was also more positive. Those stating jobs are “plentiful” rose from 30.0 percent to 32.8 percent, while those claiming jobs are “hard to get” decreased slightly from 18.3 percent to 18.0 percent.

Consumers, however, were less optimistic about the short-term outlook in June. The percentage of consumers expecting business conditions to improve over the next six months decreased from 21.5 percent to 20.4 percent, however, those expecting business conditions to worsen declined marginally from 10.3 percent to 9.9 percent.

Consumers’ outlook for the labor market remained mixed. The proportion expecting more jobs in the months ahead increased from 18.6 percent to 19.3 percent, but those anticipating fewer jobs increased from 12.1 percent to 14.6 percent. The percentage of consumers expecting an improvement in their income rose from 19.1 percent to 22.2 percent, but the proportion expecting a decline increased slightly from 8.7 percent to 9.2 percent.

Source: June 2017 Consumer Confidence Survey

About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world’s leading organizations with the practical knowledge they need to improve their performance and better serve society. 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 index is based on 1985 = 100. The composite value of consumer confidence combines the view of the present situation and of expectations for the next six months. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org.