The Consumer Confidence Index is calculated by The Conference Board, a business organization founded in 1914. It is based on a survey of consumers’ perceptions of current business and employment conditions, as well as their expectations for six months hence regarding business conditions, employment, and income.
The index for November is 70.4 (1985=100), down sharply from 72.4 in October, but higher than it was at the end of last year (66.7 in December 2012). The changes in November reflect consumer concerns about future job and earning prospects. According to Lynn Franco, Director of Economic Indicators at The Conference Board, “All in all, with such uncertainty prevailing, this could be a challenging holiday season for retailers.”
According to the Conference Board, consumers’ assessment of overall current conditions decreased slightly. Those claiming business conditions are “bad” increased to 25.2 percent from 23.0 percent, while those who said jobs are “hard to get” decreased slightly to 34.0 percent from 34.9 percent. On the other hand, consumers’ expectations continued a sharp two month decline. Even though consumers expected business conditions to improve over the next six months, their outlook for the labor market was very pessimistic. Those anticipating an improved labor market fell to 12.7 percent from 16.0 percent while those anticipating fewer jobs decreased only slightly.
Consumer expectations can vary wildly throughout the year, reflecting the current news environment when the surveys were collected. Even though the economic news has been relatively good in November, many consumers have focused more on all of the problems faced by the roll-out of the health care regulations, and their opinions of the President, Congress and institutions in general may be clouding their view of the economy. Overall, the economic condition is improving but it is improving too slowly for consumers to really feel it. With Congress once again tackling the budget and debt ceiling issues in January, and the continuing health care fiasco, it is unlikely that the positive news on the economic front will overtake the negatives coming out of Washington until well after the holiday season. This suggests that Ms. Franco is probably correct and consumers will continue to feel pressure over the remainder of the quarter.
We are not huge fans of consumer survey research, but the CCI has been around for a very long time, and long-term trends can be good gauges of large retail purchases (particularly of durable goods), mortgage lending activity, credit card use, and travel.