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 January is 58.6 (1985=100), down sharply from 66.7 in December and reflects sharp declines in both consumer expectations and their take on the current situation. Lynn Franco, Director of Economic Indicators at The Conference Board said in a press release that this erased all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. She suggests that this may be a reflection of recent steep tax increases.
Most interesting in the index was consumer’s appraisal of labor markets. Those saying jobs are “plentiful” declined to 8.6 percent from 10.8 percent, while those claiming jobs are “hard to get” increased to 37.7 percent from 36.1 percent. Those anticipating more jobs in the months ahead declined to 14.3 percent from 17.9 percent.
Consumer expectations can vary wildly throughout the year, reflecting the current news environment when the surveys were collected. Considering that nearly all of the economic news in late December and early January revolved around fiscal policy discussions in Washington it is not surprising that the index took a tumble in January. If politicians stay out of the economic news in the coming month one might expect an increase in the index come February.
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.