Goin’ Down Slow: Confidence and Economy (Early) February 2007

I’ve decided to roll the Rueters/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 February showed a shocking plunge in consumer sentiment to 69.6 from 78.4 in January.

It’s important to note that this is the lowest sentiment reading seen since the recessionary period of February 1992.

The Index of Consumer Sentiment fell 23.77% as compared to February 2007 mostly as a result of consumers’ expectations of poor future economic prospects.

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) fell to 59.4 (from 68.1 in January), a whopping 27.12% below the result seen in February 2007.

As for the current circumstances, the Current Economic Conditions Index fell to 85.4 (from 94.4 in January), 19.96% below the result seen in February 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 likely 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 0.5% from November’s level and 1.81% on a year-over-year basis compared to December 2006, a third straight monthly decline leaving the index at 135.9.

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.