Goin’ Down Slow: Confidence and Economy January 2007

I’ve decided to roll the Reuters/University of Michigan Survey of Consumers, The Conference Board’s Index of CEO Confidence and The Conference Board’s Index of Leading Economic indicators into a combined post that will run twice monthly as preliminary data is firmed.

These three indicators should disclose a clear picture of both the overall sense of confidence (or lack thereof) on the part of consumers and businesses as well the overall trend of economic circumstances.

Today’s preliminary release of the Reuters/University of Michigan Survey of Consumers for January showed a surprise uptick to 80.5 from 75.5 in December but remaining near the lowest levels seen since the early 1990’s.

The Index of Consumer Sentiment fell 16.92% as compared to January 2007 mostly as a result of consumers’ expectations of future economic prospects.

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) fell a whopping 21.12% below the result seen in January 2007.

As for the current circumstances, the Current Economic Conditions Index fell 11.86% as compared to the result seen in January 2007.

As you can see from the chart below (click for larger), the consumer sentiment data is a pretty good indicator of recessions leaving the recent declines possibly foretelling rough times ahead.

The latest quarterly results (Q4 2007) of The Conference Board’s CEO Confidence Index fell to a value of 39 with the “current economic conditions” component registering 33.54, the lowest readings since the recessionary period following the dot-com bust.

It’s important to note that on every instance that the CEO “current economic conditions” index dropped below a level of 40, the economy was either in recession or very near.

Finally, the latest results (December 2007) of the Conference Boards’ Index of Leading Economic Indicators continues to foretell troubled times ahead declining 0.2% from November’s level and 1.37% on a year-over-year basis compared to December 2006, a third straight monthly decline leaving the index at 136.5.

It’s important to note that a year-over-year decline greater than .5% has preceded every recession that has occurred in the last 59 years.