Consumer Confidence Increases Again in August

Written by Peter Wright

Consumer confidence increased strongly in August and the three-month moving average (3MMA) had the largest monthly increase since October last year, according to The Conference Board’s Consumer Confidence Survey. The composite value of consumer confidence in August was 133.4, up from 127.9 in July. The 3MMA increased from 127.9 in July to 129.5 in August, which was 10.2 points higher than in August last year.

Calculating the data as a moving average smooths the monthly volatility, which in the case of consumer confidence has been quite extreme since the beginning of 2016. The composite index is made up of two sub-indexes, the consumer’s view of the present situation and his or her expectations for the future. Both are above their nine-year trend line, though expectations are drifting down (Figure 1).

The historical pattern of the 3MMA of the composite, the view of the present situation and expectations since January 1990 are shown in Figure 2.

All three measures are higher than they were at the pre-recession peak of 2007. Expectations have been relatively constant for over a year, but the consumer’s view of the present situation has been surging since December 2010. Comparing August 2018 with August 2017, the 3MMA of the present situation was up by 20.8 and expectations were up by 3.2 points (Table 1).

The consumer confidence report includes encouraging data on job availability and wage expectations. It reports on the proportion of people who find that jobs are hard to get and those who believe jobs are plentiful, and it measures those who expect a wage increase or a decrease. Since January 2012, both of the employment components have steadily improved. The difference between the percentage of those finding jobs plentiful and those finding jobs hard to get has improved from a low of negative 40 percent at the beginning of 2012 to positive 30 percent in August 2018. (No doubt the differential was much greater immediately after the recession, but our data doesn’t go back that far.) The change in those expecting a wage increase has been less striking, but has improved from zero in early 2012 to almost 20 percent in August 2018.

Plans to buy a car, a home and an appliance all improved in August, but that didn’t show up yet in the 3MMA calculations shown in Table 1.

SMU Comment: Steel demand is dependent on the growth of GDP, which in turn is strongly influenced by consumer confidence and disposable income. The current consumer confidence report continues to be good in both these respects.

About The Conference Board: The Conference Board is a global, independent business membership and research association working in the public interest. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen. The index is based on 1985 = 100. The composite value of consumer confidence combines the view of the present situation and of expectations for the next six months. 

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