The Conference Board’s Consumer Confidence Index continued to improve in February, increasing 5.6 points to 70.4. The index has grown strongly over the past five months from its recent low of 48.6 in September. The improvement has been driven mainly by robust growth in the future expectations index, which rose 7.8 points to 95.1 in February. The present situation index remains weak though improving, with a 2.3 point increase to 33.4.
A level of caution should be applied in reading recent data, as the Conference Board has transitioned to a new data provider and a new sample design and weighting. The new weighting technique was introduced to ensure that the sample-based estimates of household population categories better match the independent census population controls. The Conference Board advises the survey questions and collection method remain unchanged and the transition should have “a limited effect on most series”. A pilot test of the new sample design yielded a 4.5 point divergence on average over the five month period, which they attributed to the use of the age variable in the post-stratification weighting. Given the divergence, a level of care should be applied in trend and year-over-year analysis across the transition period (i.e. before and after November 2010).
Consumers’ assessment of current business and labor market conditions improved moderately, but still remains weak. There was a small rise in the share of respondents who viewed current business conditions as good, up 1.1 percentage points to 12.4%, while the share of those who viewed conditions as bad remained steady at 39.6%. Similarly, those who viewed jobs as plentiful rose 0.3 of a percentage point to 4.9%, while those believing jobs are “hard to get” were down 1.3 percentage points to 45.7%.
For planned purchases, which includes home buying intent, the Conference Board advises that “due to sample design differences”, the “level shifts should be treated as breaks, and there will be no historical revisions.” Relative to the old series, there was a marked change in home buying intent under the new survey design. The number of respondents indicating that they were planning to buy a home in the next six months shifted from 2.2% in October under the old series, to 3.7% in November under the new series. The new series has been volatile, with the share of respondents indicating that they were planning to buy a home leaping from 3.2% in December to 5.2% in January, then easing back to 4.4% in February. Despite the volatility, consumer confidence in the housing market, as indicated by home buying intent, has shown improvement in recent months.
Other key housing market indicators also point to increasing consumer confidence in the housing market, with both new and existing home sales improving in December. Overall, with confidence in the housing market improving, we expect housing demand to continue to build momentum through 2011 and 2012. The growth will be slow at first, with the pace increasing through 2012.