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Consumer Confidence Bounces Back In December January 07, 2015 (0 comments)
New York, NY—Consumer confidence, which had declined in November after several months of noticeable improvement, rebounded again in December.
The Conference Board’s Consumer Confidence Index now stands at 92.6, up from 91.0 in November. The gains came from the Present Situation Index, one of the two indices that comprise the total, which rose to 98.6 from 93.7. The Expectations Index, the other component of the total, dipped to 88.5 from 89.3 in November.
The monthly survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics of what consumers buy and watch. The cutoff date for the preliminary results was December 16.
Lynn Franco, director of economic indicators at The Conference Board, said, “Consumer confidence rebounded modestly in December, propelled by a considerably more favorable assessment of current economic and labor market conditions. As a result, the Present Situation Index is now at its highest level since February 2008 [when it stood at 104.0]. Consumers were moderately less optimistic about the short-term outlook in December, but even so, they are more confident at year-end than they were at the beginning of the year.”
Consumers saying business conditions are “good” was unchanged at 24.8%, while those claiming business conditions are “bad” decreased from 21.8% to 19.6%. Consumers were also more positive in their assessment of the job market: those stating jobs are “plentiful” increased from 16.2% to 17.1%, and those claiming jobs are “hard to get” decreased from 28.7% to 27.7%.
Consumers’ optimism about the short-term outlook eased moderately in December. The percentage of consumers expecting business conditions to improve over the next six months edged down 0.3%, but those expecting business conditions to worsen declined by 0.3% as well.
Despite figures showing improvement in the job market, consumers are still wary about it. Likewise, consumers are cautious about income: the proportion of consumers expecting income growth declined 0.5%, but the proportion who expect it to decrease declined by 1.0%.
Meanwhile, the Leading Economic Index (LEI) continues to point to stronger economic conditions ahead, according to the latest report from Wells Fargo Securities’ economics group. November’s 0.4% gain marks the ninth month of growth. Financial indicators helped boost the overall index, with the interest rate spread unsurprisingly providing the strongest contribution at 0.25 percentage points. Despite some recent volatility amid tanking oil prices, the stock price component of the LEI was also a strong contributor to the tune of 0.21 percentage points.
The manufacturing sector has flexed its muscles as survey data from the ISM manufacturing index is near multiyear highs, driven by strength in the majority of its underlying components. Industrial production grew 1.3% in November, the strongest rate of growth since May 2010. Capacity utilization also came in stronger than expected and now stands higher than its long run average, as spare capacity has fallen with the pickup in production.
Despite continued strength coming from most labor market indicators, the average weekly claims component imposed the largest drag on the LEI for the month. Initial jobless claims were up for three of the four weeks of November, bringing the monthly average off its 14-year low seen in October and back up to 297,000.
“However, we do not see this as a reversal in trend, but perhaps more of a cooling down in recent improvement,” said Wells Fargo’s economists in the report. But the one aspect of the labor market that has not yet really picked up in line with stronger employment gains and a lower unemployment rate is wage growth, which we expect to materialize in 2015, said the report.
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