Sharp Recovery In Consumer And CEO Confidence

Insights | Sharp Recovery In Consumer And CEO Confidence

Author: David Templeton, CFA, Principal and Portfolio Manager

Tuesday The Conference Board (TCB) reported the June Consumer Confidence Index rose 7.3 points to 127.3. The June measure is approaching the Index's pre-pandemic level of 132.6. TCB's CEO confidence measure is reported quarterly and the second quarter CEO Confidence Index was reported at 82.0, a record high for that Index.

Conference Board's CEO and Consumer Confidence Q1 2021 and June 2021

The Consumer Confidence report noted consumers' had a more favorable view of current business conditions and the overall labor market as highlighted below.

Consumers’ appraisal of current business conditions improved in June.

  • 24.5% of consumers said business conditions are “good”, up from to 19.9%.
  • 19.5% of consumers claimed business conditions are “bad”, down from 20.6%.

Consumers’ assessment of the labor market also improved.

  • 54.4% of consumers said jobs are “plentiful”, up from 48.5%.
  • 10.9% of consumers claimed jobs are “hard to get”, down from 11.6%.

The consumers' favorable labor market view shows up in the difference between Jobs "Plentiful" minus Jobs "Hard to Get" as displayed in the blue line in the below chart.

jobs plentiful versus jobs hard to get The Conference Board June 2021

In a blog post a few days ago I highlighted data that suggests investors remain cautious on the equity market. TCB's Consumer Confidence report provided further evidence that consumers' expectations about higher stock prices in the next twelve months is not overly optimistic. The 37.6% of consumers expecting higher stock prices is an average level for the data series.  level near 50% is when one might conclude consumers are too optimistic about stock returns. As the sentiment measures are contrarian ones, this one is another one indicating the equity market might not be at a top just based on sentiment readings.

Conference Board Consumer expectations on stocks prices in 12 months

Lynn Franco, Senior Director of Economic Indicators at The Conference Board noted, "Consumers’ assessment of current conditions improved again, suggesting economic growth has strengthened further in Q2. Consumers’ short-term optimism rebounded, buoyed by expectations that business conditions and their own financial prospects will continue improving in the months ahead." In summary, the consumer feels good about the economic climate and they represent 70% of the economy. This should serve as a tailwind for positive business activity in the months ahead.

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