The Conference Board’s Consumer Confidence Index (CCI) for April came in 86.9, falling more than 30 points from the prior month. The monthly drop was the biggest for the index since 1973, reflecting the severity of the economic impact of COVID-19 containment efforts.
This piece of economic data is seen by some economists as a leading indicator for consumer spending and the US economic growth. The CCI measures consumers’ feelings about current and future economic conditions, including how respondents feel about their ability to gain employment.
Some economists view the CCI as a lagging indicator, given the data tends to follow economic trends. When a recession is over and growth resumes, individuals who are not yet working may not feel the improvement. These individuals may remain uncertain about whether the economic climate has improved for quite some time.
Consumer confidence has taken a hit from lockdowns related to the COVID-19 pandemic. In February, the index was at 132.6, just 5.3 points below an 18-year high reached in October 2018, when the CCI reached 137.9. Before that, one of the highest readings came in May 2000, when the CCI reached 144.7. The index is still well above the record low recorded in February 2009 at 25.3, suggesting it may have a bit further to fall from the April reading.
It’s a foregone conclusion that a measure of consumer confidence would suffer as a result of the devastating job losses experienced since the lockdowns began. But there is a silver lining in this data. The expectations component of the survey actually rose 5.6 points from the prior month.
”This is one of the most difficult economic environments our country has ever faced and our resolve is being tested,” said LPL Financial Chief Investment Officer Burt White. “But as states begin to reopen their economies, we can start to see the other side of this crisis.” We’ll get there, supported by the massive fiscal and monetary stimulus out of Washington, D.C., and the Federal Reserve. This optimistic tone in the expectations component is great to see. Hopefully more is yet to come.
Background on the CCI. The Conference Board, which was founded in 1916, measures the CCI. The board is an independent, non-partisan and non-profit, economic research organization that performs surveys and economic analysis. The Consumer Confidence Index started in 1967 and is benchmarked to 100 based on readings in 1985. The data is collected during the first 18 days of the month for release on the last Tuesday of the month.
There are five questions asked of the survey’s 5,000 respondents each month. The first two ask respondents’ view of current business conditions and their six-month expectations. The third and fourth questions are about the labor market as well as six-month expectations. The last question covers family income expectations in six months’ time. Participants characterize conditions as good or bad, and jobs as hard to get or plentiful. Then responses are categorized as positive, neutral, or negative. More positive responses means a higher index, neutral and negative responses means a lower index.
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