The Conference Board Consumer Confidence Composite index rose 3.4 points in February to reach 114.8, the highest reading since August 2001. The Present Situation sub-index score was 133.4 its highest level since August 2007, while the Expectation index came-in at 102.4, it highest value since January 2005.
Figure 1 shows that the present situation is close to the level attained prior to the great recession. Consumers are feeling more bullish as their wealth is increasing as a result of stock market gains and increased home values. Low unemployment and rising wage pressures are combining to create enhanced confidence to working aged people as well as those planning for retirement. Lynn Franco, Director of Economic Indicators at the Conference Board. “Consumers rated current business and labor market conditions more favorably this month than in January. Expectations improved regarding the short-term outlook for business, and to a lesser degree jobs and income prospects. Overall, consumers expect the economy to continue expanding in the months ahead.”
All regions of the country surveyed posted positive results with the exception of the Middle-Atlantic. Drilling down into income brackets, confidence was high or flat for all income brackets except those households bringing-in less than $15,000 per year. Age plays a role in consumer confidence as well with those aged 35 and older recording an increased confidence level, while those younger than 35 reported a lower confidence level. An area of unease going forward is a year on year decline in the number of consumer’s planning to purchase a “big ticket” item such as an automobile or home. This may be a short-lived phenomenon as the prospect of higher wages along with probable interest rates hikes will likely jump-start those that have been sitting on the sidelines.
At Gerdau we routinely monitor consumer confidence, readily available credit and spending habits since we know that increased consumer spending translates to stronger steel sales and vice versa.