Consumer Confidence and Sentiment Increases to Post-Recession Highs

The Conference Board’s Consumer Confidence Index and the University of Michigan’s Consumer Sentiment Index both exceeded expectations in July and reached 6-year highs. This is great news for the US economy since Consumer Spending is directly impacted by people feelings about the future direction of the economy. Clearly, the stock market’s bullish trend since January 2013 has influenced many consumers, but more on that in another post since the signs point to a market correction. Let’s get on to where we are today first!

As stated in Doug Short’s Advisor Perspectives, “The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through May 15. The 76.2 reading was above the consensus estimate of 72.5 reported by and 7.2 points above the April upwardly adjusted 69.0 (previously reported at 68.1). This is the highest level for this index since February of 2008.” Illustrated below is the current trend line.

Another measure of Consumer Confidence levels is the University of Michigan’s Consumer Sentiment Index. As stated by Doug Short in his Blog, “The University of Michigan Consumer Sentiment final number for May came in at 84.5, up from the 83.7 preliminary reading and a major advance over the April final reading of 76.4. This indicator remains at the highest level since July of 2007, prior to the Great Recession. The consensus was for the index to remain unchanged at its May preliminary level of 83.7.” Illustrated below is the current trend line.

This index has been less volatile over the years, and it clearly has resumed its upward trend. However, both indexes clearly have a long way to go to reach their record highs achieved at the turn of the Century. But, we are moving along really well in the feelings department.

Consumer Spending should resume its growth course over the next 6 months, but people will have to borrow funds to make major purchases of goods and services. The question is do they have short memories about the financial collapse of the US Economy during The Great Recession to continue their spending. I think that consumers will remain cautious about diving back into their prior spending habits, so consumer spending will continue its slow growth trend.

This concludes our analysis of Consumer Spending at the macroeconomic level for this quarter, but we will continue to post updates on the monthly economic indicators. We need to see what is happening with Private D0mestic Investment over several posts during the next week or so.



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