Summary: Conference Board Consumer Confidence Index down in January, below expectations; index remains in relatively stable, narrow range present since 2022; US Treasury yields rise moderately; expectations of Fed rate cuts soften slightly; ANZ: survey didn’t capture any effects from raft of presidential executive orders; views of present conditions, short-term outlook both deteriorate.
US consumer confidence clawed its way back to neutral over the five years after the GFC in 2008/2009 and then went from strength to strength until late 2018. Measures of consumer confidence then oscillated within a relatively narrow band at historically high levels until they plunged in early 2020. Subsequent readings then fluctuated around the long-term average until March 2021 when they returned to elevated levels. However, a noticeable gap has since emerged between the two most-widely followed surveys.
The latest Conference Board survey completed in the third week of January indicates its measure of US consumer confidence has deteriorated, albeit to a level which is still above average. The latest reading of the Consumer Confidence Index registered 104.1 on a preliminary basis, slightly below the generally-expected figure of 105.6 and down from December’s final figure of 109.5.
“Consumer confidence has been moving sideways in a relatively stable, narrow range since 2022,” said Dana Peterson, Chief Economist at The Conference Board. “January was no exception. The Index weakened for a second straight month but still remained in that range, even if in the lower part.”
US Treasury bond yields rose moderately across the curve on the day. By the close of business, the 2-year Treasury bond yield had added 2bps to 4.22% while 10-year and 30-year yields both finished 3bps higher at 5.56% and 4.80% respectively.
In terms of US Fed policy, expectations of a lower federal funds rate in the next 12 months softened slightly, although one 25bp cut is still currently priced in along with a solid chance of another one. At the close of business, contracts implied the effective federal funds rate would average 4.325% in February, 4.295% in March and 4.25% in April. December contracts implied 3.84%, 49bps less than the current rate.
Consumers’ views of present conditions and the near-future both deteriorated. The Present Situation Index dropped from December’s revised figure of 144.0 to 134.3 while the Expectations Index declined from 86.5 to 83.9.
“The cut-off date for the survey was 20 January, so it didn’t capture consumer sentiment following the raft of presidential executive orders,” noted ANZ economist Sophia Angala.
The Consumer Confidence Survey is one of two widely followed monthly US consumer sentiment surveys which produce sentiment indices. The Conference Board’s index is based on perceptions of current business and employment conditions, as well as respondents’ expectations of conditions six months in the future. The other survey, conducted by the University of Michigan, is similar and it is used to produce an Index of Consumer Sentiment. That survey differs in that it does not ask respondents explicitly about their views of the labour market and it also includes some longer-term questions.
