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Consumer Confidence
By Bruce Mushial
At different
times in our history we’ve focused more on certain economic
data than others. At one point in our history the all-important
data we watched for was the money supply, but now no one seems
to care much about the M1 or M2 measures of the amount of
money in circulation. Right now one of the areas we are focusing
on is the consumer confidence data and the other related indicators
that gauge what the consumer is thinking and doing. The reason
for the focus on the consumer is simple: businesses to business
sales are flat and it’s the consumer that is keeping
the economy afloat. We’ve all heard of the consumer confidence
numbers that are released each month, but where do they come
from? How are they compiled? What can we learn from them?
The
consumer confidence data is a government report compiled each
month by The Conference Board. A questionnaire is mailed out
to 5,000 households the first week of the month. Approximately
3,500 of the forms are returned. The data is compiled and
then released to the public at 10am on the last Tuesday of
the month. The survey questions ask consumers about their
current situation and their expectations for the next 6 months.
Future expectations are weighted 60% in the index and current
conditions make up 40%. The most recent report released on
8/29/01 showed that consumers in general were less optimistic
about current economic conditions than they were in July.
More families say current business conditions are “bad”
– 14.9 percent now, compared with 14.6 percent a month
ago. Those rating conditions as “good” declined
slightly, from 28.5 percent to 28.2 percent. But the job market
has begun to unsettle consumers.Those claiming jobs were “hard
to get” rose from 14.1 percent to 15.9 percent. Those
reporting jobs were “plentiful” fell from 35.6 percent
to 33.4 percent. Consumers were a little more optimistic about
business conditions for the next six months. Those expecting
an improvement in business conditions increased from 17.2
percent to 18.9 percent. The percent of consumers expecting
economic conditions to weaken declined from 11.2 percent to
10.7 percent. The employment outlook for the next six months
was mixed. Currently, 16.0 percent of consumers expect more
jobs to become available, up from 15.0 percent last month.
But those expecting fewer jobs through the end of this year
advanced from 16.4 percent to 17.8 percent. Slightly more
American families are expecting their incomes to rise: 22.4
percent are anticipating larger paychecks six months from
now, up from 22.1 percent last month.
There
are other economic reports that track various data about consumers.
Each month personal income data is compiled by the Bureau
of Economic Analysis and is released during the third or forth
week of the month. The report from the BEA also contains data
on personal consumption, durable and non-durable goods purchases,
and disposable income. Retails Sales data is reported monthly
and shows how consumers are, or are not spending their money.
The Consumer Credit report shows whether consumers are increasing
or decreasing credit card balances. Each report gives a window
into consumer confidence. Increased spending is a good indicator
for the economy since most people tend to keep their hands
on their wallets as the circumstances around them become less
secure.
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