The Conference Board will be releasing the monthly consumer confidence index data today.
A measure of how American consumers feel, the consumer confidence index is a closely watched report.
Typically, stronger levels of confidence translate to higher consumption. The US economy is a domestic-demand and consumption-driven economy. Therefore, the CB data will give economists a glimpse into the sentiment and thus potential expectations on growth.
The consumer confidence index from the Conference Board is one of the many forward-looking indicators focusing on consumer sentiment. For this year, consumer confidence rose to highs of 135.7 in July.
Economists forecast that the consumer confidence index will rise to 128.2 for October. It marks a modest rebound from September’s drop to 125.1. The index started the year on a sour note. In January, the index was at 120.2. But, since then, there has been a steady increase.
Conference Board’s Consumer Confidence Index, September 2019
The index is now close to the historical highs of 137.9 seen during October of 2018. Looking over the data, the consumer confidence index still remains close to historical highs. Therefore, from a month to month perspective, the data might not give an accurate view.
Declines and rises are part of the monthly volatility for the consumer sentiment index. Over the span of this year, consumer confidence has been somewhat mixed. This is largely due to the uncertainty in the global markets.
For US consumers in particular, the trade war with China remains a major concern. This is a concern that boils down to impacting the GDP growth as well.
Can the CB Consumer Confidence Index rise in October?
There have been a couple of positive developments in the global markets during the month. For the United States, in particular, progress on the China and US trade talks was a welcome shift.
The US and China were in a protracted trade war since the past few quarters. Neither of the two sides showed signs of giving up. This led to both sides levying higher tariffs on the respective imports of goods.
But, in October, both sides made progress. Both sides will be finalizing the terms of the first phase of the deal sometime in early to mid-November. Response from the equity markets was muted, however. Still, investors cheered for the progress.
This could very well see a flow into the consumer confidence as well. The ability to push through trade negotiations is a welcome change.
Meanwhile, on the monetary policy side, the central bank has also been supportive to some extent.
The central bank has been cutting rates steadily. Another (third) rate cut is widely expected this week. Lower interest rates translate to affordable credit. This, in turn, puts more money to spend among the consumer class.
The labor market is still strong with the unemployment rate at historic lows. Wage growth is steady while inflation is largely stable, although below the Fed’s inflation target rate.
Therefore, considering the above, it wouldn’t be surprising to see consumer confidence rising.
However, due to consumer confidence reflecting the ground reality, any fault lines are likely seen here.
Therefore, a weaker reading could indicate some caution. Still, with the January readings at 120, there is quite a bit of room.
As long as the index doesn’t fall dramatically, the markets are likely to be assured that growth, although slow, will still expand.