US Consumer Outlook Takes Dramatic Turn for Better

May 27, 2009

This article is included in these additional categories:

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

The Consumer Confidence Index built upon its dramatic April increase with a 14.1-percentage point jump in May. The Index now stands at 54.9, up from an adjusted score of 40.8 last month, Retailer Daily reports.? The index stood at 26.9 in March.

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The Consumer Confidence Index, based on the Conference Board’s US Consumer Confidence Survey, consists of the Present Situation Index, which increased from 25.5 in April to 28.9 in May, and the Expectations Index, which increased by close to 50%, from an adjusted score of 51 in April to 72.3 in May. Brief highlights from each index follow.

Present Situation Index

The percentage of consumers rating current business conditions as “bad” increased during the past month, from 44.9% to 45.3%. However, the percentage of consumers rating current business conditions as “good” also increased, from 7.9% to 8.7%. The percentage of consumers who think jobs are hard to get dropped from 46.6% in April to 44.7% in May. The percentage of consumers finding jobs “plentiful” also increased slightly, from 4.9% to 5.7%.

Expectations Index

Consumers’ outlook for the next six months took a dramatic upswing in May. The percentage of consumers expecting business conditions to get worse in the next six months dropped from 24.4% to 17.8%, while the percentage of consumers expecting an improvement in business conditions in the next six months increased by almost 50%, from 15.7 to 23.1%.

In the area of employment, 25.2% of consumers now expect fewer jobs in the next six months, compared with 32.5% in April. The percentage of consumers expecting more jobs in the next months grew from 14.2% to 20%. The percentage who expect their incomes to increase in the next six months increased slightly, from 8.3% to 10.2%.

Lynn Franco, director of the Conference Board Consumer Research Center, said that the index demonstrates that the economy, while still troubled, has bottomed out and begun recovering. “After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months (61.4% in September 2008),” she said. “Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first.

“Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months,” Franco added. “While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”

Although overall levels of the Consumer Confidence Index are still low, retailers and other marketers can still take the significant growth in its numbers, especially in the Expectations Index, as a positive sign about the current mindset of US consumers. There have been a number of mixed positive and negative economic and consumer behavior signals so far this year, including:

Positive Signals

Negative Signals

Related research from The NPD Group echoes the latest Conference Board numbers, finding that consumers appear to be feeling more positive about the state of the US economy, though the sentiment has not yet trickled down to retail purchase intent.
About the survey: The Consumer Confidence Survey is 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 May’s preliminary results was May 19.

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