Consumer confidence soared again in November as the Conference Board Consumer Confidence Composite Index rose 3.3 points to 129.5 to reach its highest level in 17 years. This make five monthly increases in a row. The composite index three month moving average, (3MMA) measured 125.4, up 3.0 points month on month (m/m). On a year over year comparison, the composite index was up 18%.
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.
Figure 1 shows the Composite, Present and Expectation indexes from 2005 to present. The Present Situation score was up 1.9 points month on month, (m/m) to 153.9 and the Expectation sub-index jumped 4.3 points m/m to 113.3. Consumers remain very confident as evidenced by the soaring Expectation index which advanced 22%, 3MMA y/y. The Present situation index is also performing well, rising 18%, 3MMA y/y. The present situation scored the highest result since July 2001, business conditions were also strong, with 34.9% saying conditions are good, up from 29.7% a year ago.
Figure 2 chart two sub-indexes, 1] Employment – jobs plentiful, (blue-line) and 2] Expected income – increase, (green-line). The 3MMA jobs plentiful index gained 0.9 point m/m to 35.5%. Those who saw jobs harder to get, (3MMA) fell 0.5 points to 17.3%. The expectation of higher wages index moved-up a tick to 20.3%, while those expecting an income decrease, fell 0.2 points to 7.9%.
In percentage terms the jobs hard to get index fell 20.3 % y/y, however those expecting a higher income a much smaller 5.0%. Wage increases have been stubborn thus far in the recovery keeping a lid on inflationary pressures.
Purchase intentions were mixed. Consumers planning to purchase an automobile fell 1.4 point m/m to 12.6%. New appliance purchase expectations fell 3.2 points m/m to 52.0%, while those looking to buy a house improved to 6.9%, up 0.5 percentage points.
Inflation expectation at the consumer level continued its downward trend, falling 0.3% y/y to 4.5% this month.
Both consumers and business confidence is high and gaining strength. Economic data continues to be solid with an economy at full employment. All eyes are now on Washington as the budget and tax policy take center stage. Passage of the Trump administrations massive tax overhaul remains uncertain at this point and time is running short before the end of year recess. Changes to the corporate tax level could have a $2.5 trillion impact to the economy over a 10 year time horizon.
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.