2. This morning, Gallup reported that its Economic Confidence Index held at -16 last week, the highest index level in the four-plus years of Gallup Daily tracking in the United States.
3. Also this morning, The Conference Board reported that its consumer confidence index fell to a five-month low in May, as Americans were less optimistic about
current labor market and business conditions, as well as the short-term
outlook.
What are we to make of these conflicting consumer confidence reports? Perhaps it's a reflection of the weakness in survey-based measures of consumer confidence, or that surveys have large margins of error?
In other news today, S&P reported that its Case-Shiller Home Price Index dropped in March by 2% to a post-crisis low. Note that the Case-Shiller home price index is calculated based on a three-month moving average with a two month lag and is therefore based on home prices in January, February and March. The sales and price gains I was reporting recently were for April, and those improvements won't be captured by the Case-Shiller index until next month's report.
2 comments:
ReplyDelete1. the CS number was actually up for march vs feb. that seems consistent with april gains but the trailing 3 month headline number will be slow to show it. CS is the only housing price measure i tend to trust as it actually compares apples to apples by tracking the same houses as they resell, not average sales prices that can get skewed by square footage etc and tend to be full of adjustments to try to correct for that. will be interesting to see how that plays out in april, but nothing thusfar makes gains in april look unlikely.
2. the confidence surveys are very difficult to run. study after study has shown that researchers tend to get the results they expect by communicating bias and expectation to respondents unconsciously. tell your surveyors that 70% will say "no" and that's what they find even while a group that was told 70% will say "yes" gets the same results with the same question.
how (and by whom) the question is asked matters enormously.
i doubt these surveys can be meaningfully compared to one another or are even terribly self consistent over long periods.
I only trust the results I get from those surveys certified by the North Carolina Board of Dietetics/Nutrition.
ReplyDeleteYou make some good points, Morganovich. There is also a quote from Moody's in today's Bloomberg talking about the inconsistency:
ReplyDelete"Typically, the Michigan Index is more sensitive to things like stock prices and gasoline prices, whereas the consumer confidence index tends to be more highly correlated with the labor market"
I'll see if I can;t find a link. It was delivered to my phone.
Maybe they are not accounting for political party. I assume if you think the current president will be elected that you will not be confident that things will get better, but if you think we will have a new president than things are looking up.
ReplyDeleteAlso, are these surveyors licensed by at least state governments? If not, then I wouldn't believe a work they say (joke).
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ReplyDeletewell.. you gotta be careful....
ReplyDeletethat ole " Irrational exuberance" can bite you in the butt every time...
Does anyone know what the screening processes in these types of surveys are? I would think you'd need to screen down to the smallest similar detail to get anything meaningful from such a wildly emotional and personal opinion.
ReplyDeleteyou missed one:
ReplyDeleteEconomic pessimism is back
Our new NBC/WSJ poll shows that economic pessimism -- after the April jobs report, new worries out of Europe, and stock losses -- is back. Only 33% of respondents believe the economy will get better in the next year, down five points from April and seven points from March
http://firstread.msnbc.msn.com/_news/2012/05/23/11828729-first-thoughts-economic-pessimism-is-back?lite
What's interesting is we are not seeing economic pessimism in the numbers:
ReplyDeleteDeflated Retail Sales 9excl. autos and gas stations) are at record levels
Light vehicle retail sales are at the highest since Dec 2008.
Deflated Personal Consumption Expenditures are at record levels.
Home Sales are looking decent.
For all the talk of economic pessimism, it's not stopping people from spending.
jon-
ReplyDeleteand debt levels are heading back up and spending is outpacing income significantly.
spending more than you take in may drive pessimism as you feel more badly stretched as you try to keep up with deferred expenses that can no longer be deferred.
people love to paint consumption going up more than income as a sign of optimism, but it that really how that makes you feel? running up debt would not up my optimism.
Only certain types of debt levels, specifically "luxury" debt like home loans, car loans, personal loans, etc (I'm not including student loans, because that's something we all know). We have seen some increase in credit card debt, but not too significant.
ReplyDeleteI'm not necessarily disagreeing with you. I just think these consumer confidence surveys are not the greatest of economic indicators and their actions do not necessarily reflect what they say. This could be because consumers are inundated with bad news, making them believe things are worse than they actually are.
And it also could be that consumers are being PR'ed with biased & incorrect good news, making them believe things are better than they actually are.
ReplyDeleteAnd it also could be that consumers are being PR'ed with biased & incorrect good news, making them believe things are better than they actually are.
ReplyDeleteHave you watched the news lately or read a newspaper? No one is reporting good news.
I'm leaning toward Occam. The reason we have so many contrary surveys and indicators is due to "walking on a razor blade".
ReplyDeleteIn other words, the surveys are reasonably correct, but the confusion and uncertainty are running at very and unusually high levels.
Another and more out there interpretation is that we're in an "Ideology Bubble", aka headed toward "Peak Ideology".
"Have you watched the news lately or read a newspaper? No one is reporting good news."
ReplyDeletei think that's a bit extreme.
there's an awful lot of positive spin in the financial press. i think there's just a lot of extreme, unbalanced, biased reporting going on on both sides and that if you seek excess in either side, you'll find it.
extreme sells papers (or pixels or whatever).
the problem with having such high cycle speed media and so many outlets is that the time to fact check is low and the need to be shrill and sensationalist goes way up as it's harder to attract attention in a crowd by being moderate.
we all tend to not to notice the bias of those who agree with us and be struck hard by that of those that do not.
i have not seen the news as particularly negative now any more than it was overly positive a month or 2 ago (but then, i do not watch tv).
but, there are some pretty major events in the next couple weeks that could be generating concern.
the greek election is going to be a big deal.
so is the supreme court ruling on obamacare.
so is the brewing budget fight at the us federal level.
so is the spanish banking situation, which is anything but resolved.
uncertainty breeds lack of confidence.
further, the US tax situation remain bleak. with nothing done, taxes will rise a great deal next year (by over 60% on cap gains if obamacare stands).
given the political deadlock on this and the budget, i can see being concerned.
in general, times of high political activism are confidence killers.
but, in general, i agree with you that confidence numbers are not terribly useful as indicators.
i never use them in models.
Consumer confidence only matters if one is a Keynesian. In the end, consumer spending means little to the economy. It's the willingness of entrepreneurs to save their profits and reinvest them that grow the economy.
ReplyDeleteAll this worry over consumers is pointless.
What are we to make of these conflicting consumer confidence reports? Perhaps it's a reflection of the weakness in survey-based measures of consumer confidence, or that surveys have large margins of error?
ReplyDeleteWhat we make of the conflicting reports is that the people who issue them can come up with any conclusion that they want to spin. This has been going on for years both before and after the crash. But in the end reality will prevail as it always does.
Vangel, while that's true, a fuller picture of actual data shows that things are not exactly wonderful.
ReplyDeleteHere's a chart of 5 sentiment measures, all based at 100 as of Jan 2005.
http://www.nowandfutures.com/images/sentiment_measures_short.png
Vangel, while that's true, a fuller picture of actual data shows that things are not exactly wonderful.
ReplyDeleteHere's a chart of 5 sentiment measures, all based at 100 as of Jan 2005.
http://www.nowandfutures.com/images/sentiment_measures_short.png
I do not dispute the argument that things may not be as great as they are being sold as to the public. If most poll creators can manufacture a predetermined trend based on how, when, and who is asked it is hard to take the polls as seriously as Mark seems to.
I do not dispute the argument that things may not be as great as they are being sold as to the public.
ReplyDeleteThat was indeed my basic point, and also supports my earlier post:
"I'm leaning toward Occam. The reason we have so many contrary surveys and indicators is due to "walking on a razor blade".
In other words, the surveys are reasonably correct, but the confusion and uncertainty are running at very and unusually high levels."
Consumer confidence reports are worthless. Only Keynesians (who believe that consumer spending drives the economy) put any stock in them. Private sector investor confidence reports would be more useful.
ReplyDeleteThe Conference Board, Bloomberg, U. Michigan, AAI & Citigroup are all private sector reports.
ReplyDeletemore conflicting data:
ReplyDeletethe NAR data for pending home sales in april is just out, and it's a huge drop.
"US Pending Home Sales drop 5.5% in April - The pending home sales index dropped 5.5% in April and the change in the index reported for March was revised modestly lower (from 4.1% to 3.8%). The April report was weaker than expected and put a damper on the recent run of relatively upbeat housing indicators. The level of pending home sales reported for April (95.5) was the weakest reported so far this year, and the latest data point to some weakening in existing home sales ahead because pending home sales—measured when contracts are signed—typically lead existing home sales—measured when transactions are completed—by about one or two months"
this bodes poorly for the summer.
this is just a sort of impression and i have not actually tried to validate it objectively, but has anyone else been getting the sense that the stats provided by the government seem to be more positive than those provided by private entities?
such a divergence (if it exists) would be a bad sign in terms of the honesty of federal figures, and in an election year, might be a sign of outright corruption of the numbers for political ends.
again, not sure this is happening, but i thing it would be a really interesting thing to track.
such a divergence (if it exists) would be a bad sign in terms of the honesty of federal figures, and in an election year, might be a sign of outright corruption of the numbers for political ends.
ReplyDeleteMost of the numbers released by the government are massaged and manipulated for political purposes.
Most of the numbers released by the government are massaged and manipulated for political purposes.
ReplyDeleteCONfidence is alive & well. -bg-
v-
ReplyDeleteit certainly seems that way.
after what was done on CPI, lots of them became suspect because they use it (or something similar) to get "real" numbers.
the use of "real" as a term to denote inflation adjusted has becomes increasingly ironic since the 90's.
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ReplyDelete