The Conference Board Consumer Confidence Composite fell back 1.5 points in May to 117.9 points, while the three month moving average (3MMA) stood at 119.7. Despite the decline for the second consecutive month, the 3MMA is at its highest level since January 2001.

The present situation has surpassed the level attained prior to the great recession, consumer-confidence-fig1(Figure 1). The Present Situation sub-index score increased slightly to 140.7 while the Expectation sub-index came-in at 102.6, down 3 points month on month, (m/m). Both sub-indexes are at the highest level since 2001 on a 3MMA basis. Looking at the numbers by age cohort shows some differences in apparent confidence levels between age groups. Middle-aged consumers recorded only a slight loss in confidence, while the >55 group had a steep loss in confidence. The under 35 year old consumer group on the other hand has shown a strong surge in confidence over the past few months.

consumer-confidence-fig2Figure 2 chart two sub-indexes, 1] Employment – jobs plentiful, (blue-line) and 2] Expected income – increase, (green-line). The jobs plentiful index is up 14.9%, 3MMA year on year, (y/y), while the expectation of higher wages index is up 10.9% 3MMA y/y. Purchase intentions fell m/m. Consumers planning to purchase an automobile fell two points m/m to 12.0%. Folks thinking of getting a new appliance dropped 4.2 points to 48.7%, while those looking to buy a house rolled-back 0.6 of a point to 5.8%. The business expectations index also fell, down 3.8 points to 21.3% of businesses that expect conditions to improve over the next six months.

Most economists predict that 2017 will be a solid year for consumer spending despite the weak start so far this year. Low unemployment levels (jobless rate 4.4% in April), will broaden the consumer base and all indications are that wages will be bid higher as competition for employees fortifies and the quit rate surges.

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.