How ya doin’? It might be a simple question from an old friend you haven’t seen in a while, or maybe it’s someone closer who is worried about you and trying not to be obvious about it. But if you’re in the business of gauging consumer confidence, it’s a very serious question. And every month two different groups ask the question of 500 to 3,000 people just to see how we, the consumers of the US, are doin’.
The answer overall is that for all the asking and telling it’s amazingly hard to tell. Both the Conference Board and the University of Michigan / Reuters groups that do the surveys found October and November to be big downers, but the latter tells us there was a big rebound in early December. It’s difficult to say why, so the professionals that have to explain it are scrambling. Like so many important indicators there is both good news and bad. Let’s try to sort it out.
First, there are the surveys themselves. The Conference Board, an international business think-tank that has been around since 1916, puts the most effort into it. They mail out surveys to people at random with a goal of 3,000 of them returning. Their data is the most complete and useful, as we’ll get to later. The last number they gave us was on 26 November, when a reading of 70.4 came in, down two points from October. For them, 1985 is normalized to 100, so the direction is more important than the number. The takeaway less is confidence is down.
The University of Michigan teamed up with Reuters to produce their own number, based on 500 telephone calls. It last came in on 6 December at 82.5 (1966 is 100, don’t worry about it) which was up big from 75.1. It greatly exceeded expectations and was generally attributed to better news on the job front, just as Barataria credits all good news.
So is confidence up or down? Before you answer, let’s scramble it some more.
The Conference Board releases data broken down by income, so we can see who is more confident about the economy. This handy chart, from Bloomberg, shows how it’s been tracking for all the different income levels reported:
You can see that the low point came in the middle of 2008, which is to say even before the fall of Lehman in October. Since that time, the most confident group has consistently been those with the highest income. The fall shown in November has more to do with their confidence dipping than anything else in the chart.
That’s not to say that people in the middle aren’t slowly gaining confidence in the economy, too. But it’s much more muted and consistent. Growth in jobs has been there, but it hasn’t been good enough. People are still scared.
Barataria predicted that the Conference Board number would normalize around 70 for the year, neither good nor bad. It got quite a bit ahead of that in the summer before that awful drop at the end of the year. It’s right at 70 and consumer spending is not going to run away any time soon.
The takeaway from this is that while 2013 has been a decent year, it has not been any kind of amazing breakout by any measure. Whether you believe that consumer confidence is up or down there is little doubt that the vast majority of consumers are less than enthusiastic – but perhaps a bit more hopeful than they have been in past years. It should fuel a decent enough retail holiday season, which does appear to be up at the higher end of expectations, as we predicted. But that’s about it.
The long, painful restructuring of our economy is moving ahead slowly and cautiously. There isn’t a lot to cheer at the end of this year other than the fact that it could be a lot worse – and it was just a few years ago. The Managed Depression of 2001-2017 still has to run its course over the next few years and people’s attitudes are going to change slowly.
So is confidence up or down? The short answer is that a year ago the Conference Board number, which started the year at 58.6 in January, is up a little bit over the whole year so far. That’s about what anyone could reasonable expect. Consumer spending is not going to lead any kind of “recovery” like a typical postwar recession – this is going to take a lot longer to work out.
Consider that the first preliminary prediction for 2014.