The Conference Board compiles a survey of consumer attitudes on present economic conditions and expectations of future conditions. Five thousand consumers across the country are surveyed each month. While the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month. Why Investors Care
| Released on 5/27/08 For May 2008 | ||||||||||||
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Highlights
The Conference Board's consumer confidence report for May, without exaggeration, is dismal. The main index fell nearly 5 points to 57.2, the lowest reading since 1992. But more importantly, 12-month inflation expectations swelled to 7.7 percent, up 9 tenths from May and confirming a similar spike seen in the Reuters/University of Michigan report at mid month. Views on the labor market continue to deteriorate, with those saying jobs are currently plentiful falling 8 tenths to 16.3 percent while those saying they are hard to get rising 1 tenth to 28.0 percent.
There are five main sub-components to the report and all five -- in what may be a record in 40 years of data -- have all turned negative. The last to fall was future income with pessimists now in front of optimists by 14.9 percent to 13.4 percent. The expectations index, one of two main components that make up the headline index, is at an all-time low of 45.7, down from 50.0 in April.
Consumers are unusually pessimistic on present and future business and labor market conditions as well as future income prospects. They are also building in inflation expectations at a pace not seen in at least a generation. There was little immediate reaction to the report which was accompanied at 10:00 a.m. ET by a slight gain in new home sales. But this report is very likely to weigh on the dollar and stocks and push Treasury yields lower through the day.
The Conference Board's consumer confidence index has been quite gloomy lately as this index fell nearly 4 points in April to 62.3 -- the worst reading since the early 1990s. The present situation component, which makes up 40 percent of the headline index, fell more than 10 points to 80.7 for its worst reading since 2003 when the unemployment rate had peaked at 6.3 percent. But the worst news in the report was a spike in inflation expectations, which were up 7 tenths for the month to 6.8 percent -- a record level matched only after Hurricane Katrina in 2005. Unless consumer confidence picks up, the rebound that many economists have been predicting for the second half may be rather flat.
Consumer confidence Consensus Forecast for May 08: 60.0
Range: 58.0 to 62.5
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Typically retail sales will move in tandem with consumer optimism - although not necessarily each and every month. |
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