Thomson Reuters/University of Michigan reported that its Consumer Sentiment Index rose by 0.1 point on a seasonally adjusted basis in November to 82.7. This month’s increase in the Consumer Sentiment Index marks the fourth over-the-month increase in this measure of consumer confidence. Meanwhile, the Conference Board reported that its Consumer Confidence Index rose to a seasonally adjusted 73.7 in November 2012, 0.6 points above its October reading. This is the third consecutive monthly increase in the Conference Board’s measure of consumer confidence. While the data from the Conference Board illustrates a sustained improvement in consumer confidence, the level of growth has slowed. Prior to the 0.6 point increase in the Conference Board’s Consumer Confidence Index that was recorded in November, the Index rose by 4.7 points between September and October, 2.3 points slower than the 7.1 point increase experienced between August and September.
The deceleration in consumer confidence reflects a combination of increased optimism about the future and a small decline in optimism about the present. In November, the Consumer Confidence Index: Expectations rose by 1.1 points on a seasonally adjusted basis. However, the November increase in consumers’ outlook for the future was offset by a slight dampening in consumers’ views of present conditions. In November, the Consumer Confidence Index: Present Situation declined by 1.1 points on a seasonally adjusted basis. In the two previous months growth in the headline measure of consumer confidence reflected an improvement in both consumers’ assessment of the present situation and their expectations for the future. Between August and September 2012, the Consumer Confidence Index: Expectations grew by 10.4 points and the Consumer Confidence Index: Present Situation rose by 2.2 points. In October, the Consumer Confidence Index: Expectations increased by 2.5 points, while the Consumer Confidence Index: Present Situation rose by 8.0 points.
The figure below illustrates that consumers’ expectations about the future have rebounded from the most recent recession and are now consistent with their longer-term average. Although consumers’ views of the present situation have improved since the recession ended, they remain well below their pre-recession peak. Since the end of the recession in June 2009, consumers’ optimism about the future, which remains relatively steady over time, has increased by 19.6 points. It is currently 9.4 points above its level when the recession began in December 2007 and only 2.2 points below the average level held since January 1990. However, consumers’ views of the present situation, which fell further than their expectations index peer over the most recent recession, have not fully recovered from their pre-recession high. After peaking at 138.5 in March 2007, consumers’ views of the present situation fell by 84.8 percent to 21.1 in October 2009. Since October 2009, consumers’ views of the present situation has regained 30.2 percent of this decline, but still sits at a level that is 59.2 percent below its pre-recession high. From these results, it’s clear that overall consumer confidence is much more heavily influenced by their perception of current conditions compared to expectations about the future.