Present Situation Index Rebounds
Consumers’ assessment of present-day conditions was, on the whole, more positive than last month. The Present Situation Index rose from a revised score of 20.2 in December 2009 to 25 in January 2010. Although the percentage of consumers rating current business conditions as “bad” increased from 45.7% to 46.1%, the percentage rating current business conditions as “good” also rose, from 7.5% to 9%.
Consumers’ assessment of the labor market improved moderately. Those saying jobs are “hard to get” declined from 48.1% to 47.4%, while those saying jobs are “plentiful” increased from 3.1% to 4.3%.
Expectations Index Slightly Improves
The Expectations Index, which shot up last month from 70.3 to 75.9, its highest reading since hitting 75.8 in December 2007, moderated its growth this month, increasing to 76.5. The Expectations Index measures consumers’ views on how the economy will perform during the next six months.
The percentage of consumers expecting an improvement in business conditions during the next six months decreased from 21.2% to 20.9%, while those anticipating conditions will worsen increased from 11.8% to 12.7%.
However, consumers’ outlook on the labor market improved somewhat. The percentage of consumers expecting fewer jobs decreased from 20.6% to 18.9%, and the percentage of consumers anticipating a decrease in their incomes declined from 18.4% to 16.2%. In one negative result, the percentage of consumers expecting more jobs to become available in the next six months declined from 16.4% to 15.5%.
Lynn Franco, director of The Conference Board Consumer Research Center, said despite the moderate improvement in this month’s Consumer Confidence Index score, consumer views on the economy remain mixed. “Regarding their financial situation, while consumers were less dire about their income prospects than in December, the number of pessimists continues to outnumber the optimists,” said Franco.
Other Forward-looking Indices Give Mixed Signals
Two other recent forward-looking consumer indices offer mixed signals on where consumer economic behavior is heading in 2010. The Conference Board’s Leading Economic Index rose for the ninth straight month in December 2009, and saw its rate of increase grow for the third straight month. Combined with a slight increase in the Conference Board Coincident Economic Index (CEI), this indicates the U.S. economy may be in early stages of recovery from the recession which began in December 2007.
The LEI, which measures economic activity for the next six months, increased 1.1%, from 104.9 to 106.4. This follows a 1% increase in November 2009, 0.3% increase in October 2009 and 1.2% increase in September, and marks the LEI’s ninth straight month of growth following 20 straight months of decline.
However, The Deloitte Consumer Spending Index, which attempts to track consumer cash flow as an indicator of future consumer spending, fell 0.6% in December 2009, following six straight months of growth. However, the Index, which attempts to track consumer cash flow as an indicator of future consumer spending, is still near its five-year high and is well above its recent low point of 3.07% in October 2007. Deloitte analysis indicates that impact of rising energy prices on real consumer wages has pushed down the Consumer Spending Index.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. The cutoff date for January’s preliminary results was January 19, 2010.