Consumer confidence slipped a bit in September as the Conference Board Consumer Confidence Composite fell 0.6 points to 119.8 points. Despite the slight decline, confidence remains at an elevated level. The composite index three month moving average (3MMA) stood at 120.0, up 0.8 points month on month (m/m).

The Consumer Confidence Survey measures the level of confidence individual households have in the performance of the economy. Survey asks a nationwide representative sample of 5,000 households, of which approximately 3,500 responses. Households are asked five questions that include (1) a rating of business conditions in the household’s area, (2) a rating of business conditions in six months, (3) job availability in the area, (4) job availability in six months, and (5) family income in six months that go into the top line index.

consumer-confidence-fig1Figure 1 shows the Composite, Present and Expectation indexes from 2005 to present. The Present Situation score fell 2.3 points month on month, (m/m) to 146.1, however, the Expectation sub-index moved-up 0.5 point m/m to 102.2. Consumers remain very confident as evidenced by the soaring Expectation index which advanced 20%, 3MMA y/y. The Present situation index on also is performing admirably, rising 19%, 3MMA y/y, surpassing the highs of the 2006 through 2008 period.

Figure 2 consumer-confidence-fig2chart two sub-indexes, 1] Employment – jobs plentiful, (blue-line) and 2] Expected income – increase, (green-line). The 3MMA jobs plentiful index was up 0.2 points m/m to 33.7. Those who saw jobs harder to get 3MMA fell 0.1 points to 18.2. The expectation of higher wages index rolled-back 0.13 point to 20.1, while those expecting an income decrease, also fell 0.33 points to 8.9.

Purchase intentions were mixed. Consumers planning to purchase an automobile fell 0.8 point m/m. New appliance purchase expectations increased 3.5 points m/m to 54.0, while those looking to buy a house rolled-back 0.4 of a point to 6.9. At the State-level, consumer confidence was down in Texas as sentiment fell in Florida. There is little doubt that this was as a result of the hurricanes.

The unemployment rate is likely to inch higher this month which is common following a hurricane. History has shown that the increase is normally short-lived.

Retail sales were lower than expected. Once again this can be attributed to the hurricanes affecting spending patterns.

Both consumers and business confidence are high and gaining strength. Economic data continues to be solid with an economy at near full employment with several months of strong job gains, allowing job creation to outpace population growth.

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.