Future Optimism Drives Up Consumer Confidence

December 30, 2009

This article is included in these additional categories:

Analytics, Automated & MarTech | Financial Services | Retail & E-Commerce | Staffing

Following decreases in September and October and a November increase, the December 2009 Consumer Confidence Index jumped again, from 50.6 to 52.9, primarily because of a more positive outlook for business conditions and more upbeat expectations for the labor market in the future, according to the Conference Board.

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The forward-looking Expectations Index increased substantially, following a slight November gain, driving the entire Consumer Confidence Index growth, reports Retailer Daily.? The Present Situation Index, which remained virtually unchanged last month, fell notably this month.

A brief review of each index follows.

Present Situation Index Drops

The Present Situation Index dropped from 21.2 in November to 18.8 in December, its lowest level since hitting 17.5 in February 1983. The percentage of consumers rating current business conditions as “bad” increased from 44.5% to 46.6%, while the percentage rating current business conditions as “good” decreased from 8.1% to 7%.

Future-Looking Indices Show Consumer Hope

Meanwhile, in one bright spot for the Present Situation Index, the percentage of consumers saying jobs are currently “hard to get” decreased from 49.2% to 48.6%, while those claiming jobs are “plentiful” also decreased, from 3.1% to 2.9%.

Expectations Index Shoots Up

In December, the Expectations Index shot up from 70.3 to 75.6, its highest reading since hitting 75.8 in December 2007. The percentage of consumers anticipating an improvement in business conditions during the next six months increased from 19.7% to 21.3%, while the percentage expecting conditions to worsen dropped from 14.6% to 11.9%.

The labor market outlook generally improved as the percentage of consumers expecting more jobs in the next six months grew from 19.7% to 21.3%, and the percentage expecting fewer jobs decreased from 23.1% to 20.7%.? In one negative consumer view of the short-direction of the labor market, the proportion of consumers expecting an increase in their incomes dropped from 10.9% to 10.3%.

Lynn Franco, director of the Conference Board Consumer Research Center, said despite consumer optimism about the economy in the next six months, pessimism about income growth could negatively impact retailers. “This will likely continue to play a key role in spending decisions in early 2010,” said Franco.

Several other recent future-looking consumer indices also demonstrate hope for a better 2010 on the part of US consumers. The Conference Board’s Leading Economic Index (LEI), which measures economic activity for the next six months, increased 0.9%, from 104 to 104.9, in November 2009. This follows a 0.3% increase in October and 1.2% increase in September, and marks the LEI’s eighth straight month of growth following 20 straight months of decline. In addition, the Conference Board Coincident Economic Index (CEI), which measures current economic activity, increased 0.2%, from 99.9 to 100.1, following flat performance in October and a fractional decrease in September. A score of 100 marks the performance level of both the LEI and CEI in 2004.

The Deloitte Consumer Spending Index, which attempts to track consumer cash flow as an indicator of future consumer spending, rose 8.9% in November 2009, following a 15.7% jump in October and an 11.6% hike in September 2009.

In addition, the American Express Spending & Saving Tracker indicates that in the next 30 days, 32% of consumers will spend more than they did in the last 30 days, and another 33% will spend the same as they did in the last 30 days. A majority of these consumers are spending the same or more due to holiday shopping-related expenses.

About the index: The Consumer Confidence Index is preparesd based on a representative sample of 5,000 US households. The monthly survey is conducted for The Conference Board by TNS. The cutoff date for December’s preliminary results was December 21, 2009.

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