My, my — Tuesday’s US consumer confidence survey certainly took some analysts by surprise.
The Conference Board’s confidence index fell to 47.7 from a revised 53.4 in September, while analysts polled by Reuters had expected a rise to 57.0. The present situation index, meanwhile, fell to 20.7 from 23.0 last month, while the expectations index fell to 65.7 from 73.7 in September.
So is the analyst community — which was previously sold on the idea of a decisive recovery taking shape — about to reconsider its view?
Not completely. Here’s Bank of New York Mellon’s take on the figures (our emphasis):
Consumer confidence fell to 47.7 in October from a revised 53.4 in September, compared to consensus expectations of 53.5. The present situation component fell to a 26-year low of 20.7 in October from 23.0 in September, while the expectations component fell to 65.7 from 73.7. Falling present conditions in the Mountain and midwestern regions have played a significant factor in the decline in national confidence readings. The present situation/expectations differential supports the case for a legitimate economic recovery, despite the recent setback.
Regional differences in consumer confidence play an important role in explaining the drop in the headline figure this month. A precipitous fall in the present conditions component in the Mountain and midwestern regions have played a significant factor in the decline in national confidence readings. In the Mountain region, the present situation fell to 26.5 in October from 43.5 in May. In West North Central, the present situation fell to 31.7 from 41.8, in the East South Central it fell to 19.2 from 34.7, and in the West South Central in fell to 65.5 from 82.5. The fall in property prices, and rise in foreclosures and unemployment has hit these regions particularly hard, helping to explain the weak present situation readings. By contrast, expectations on the East Coast regions remain near highs of the year. Expectations in the East North Central region rose to 70.1 in October from 41.2 in April, while in the Middle Atlantic region expectations rose to 65.9 in October from 52.6 in April. Breaking the report down by component type reveals that the present situation (20.7 from 23.0) remains well below future expectations (65.7 from 73.7) for the 12th consecutive month, reflecting a sustained trend shift supporting the case for a legitimate, albeit lagged, recovery. Although some others, such as Marc Ostwald at Monument Securities, are a bit more sceptical. As he wrote late on Tuesday:
I really have nothing else to say other than that if the numbers below are a good representation of the US economic recovery as of October 2009 (and these surveys are among the best proxys), then it would appear that the US economy has ground to a complete halt. I am additionally reminded of those wise words from ECB’s Yves Mersch in August, when he said as long as global growth is supported by public money, one can’t talk of sustainable growth. From the look of the numbers below, one would have to say that ‘public money’ is going to have to stay in place for a very, very, very long time.
Barclays Capital, meanwhile, didn’t really seem to know what to make of the data:
Consumer confidence dropped to 47.7 in October from 53.4 in September, below our (54.0) and consensus (53.5) expectations. The weakness in the report was primarily due to a large decline in the expectations component to 65.7 from 73.7. The present situation index also continued to weigh on the headline; today’s reading of 20.7 fell below this cycle’s March low of 21.9. Despite falling jobless claims, the labor differential still worsened in October to -46.2 (last: -43.4). Buying plans overall were relatively stagnant this month, inching lower across most categories. Although today’s report was consistent with the recent fall in the University of Michigan’s index of consumer sentiment, there seems no obvious explanation for the declines. Perhaps respondents felt discouraged by the slow pace of improvement in the labor market. Confidence is still substantially higher than the trough of 25.3 in February, but quite depressed compared with the pre-recessionary peak of 111.9. We expect the headline index to rise over the next several months as consumers experience more tangible evidence of economic recovery in both business conditions and employment.
Related links:
US consumers still not feeling confident. Housing data suggest why – FT Alphaville
U.S. Economy: Consumer Confidence Down on Job Concern – Bloomberg