This post combines the latest results of the Rueters/University of Michigan Survey of Consumers, the Conference Board’s Index of CEO Confidence and the State Street Global Markets Index of Investor Confidence indicators into a combined presentation that will run twice monthly as preliminary data is firmed.These three indicators should disclose a clear picture of the overall sense of confidence (or lack thereof) on the part of consumers, businesses and investors as the current recessionary period develops.
Today’s final release of the Reuters/University of Michigan Survey of Consumers for April confirmed another startling plunge in consumer sentiment to a reading of 62.6, a decline of 28.13% compared to April 2007.
Further, the survey disclosed that 70% of consumers plan to use their “rebate” checks to either pay down debt or save in an attempt to cope with the current economic uncertainty.
It’s important to note that this is the lowest consumer sentiment reading seen since the recessionary period of March 1982 which, according to many metrics most notably employment, was the most severe recession seen in the U.S. since the Great Depression.
The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) fell to 53.3, the lowest reading since November 1990’s recessionary environment, 29.78% below the result seen in April 2007 and 39.16% below the most recent peak set in January 2007.
As for the current circumstances, the Current Economic Conditions Index fell to 77, the lowest reading since January 1983, 26.39% below the result seen in April 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 predicting rough times ahead.
The latest quarterly results (Q1 2008) of The Conference Board’s CEO Confidence Index fell to a value of 38 the lowest readings since the recessionary period of the dot-com bust.It’s important to note that the current value has fallen to a level that would be completely consistent with economic contraction suggesting the economy is either in recession or very near.
The April release of the State Street Global Markets Index of Investor Confidence indicated that confidence for North American institutional investors decreased 4.9% since March while European and Asian investor confidence both declined all resulting in a drop of 4.4% to the aggregate Global Investor Confidence Index.Given that that the confidence indices purport to “measure investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors”, it’s interesting to consider the performance surrounding the 2001 recession and reflect on the performance seen more recently.
During the dot-com unwinding it appears that institutional investor confidence was largely unaffected even as the major market indices eroded substantially (DJI -37.9%, S&P 500 -48.2%, Nasdaq -78%).
But today, in the face of the tremendous headwinds coming from the housing decline and the mortgage-credit debacle, it appears that institutional investors are less stalwart.
Since August 2007, investor confidence has declined significantly led primarily by a material drop-off in the confidence of investors in North America.
The charts below (click for larger versions) show the Global Investor Confidence aggregate index since 1999 as well as the component North America, Europe and Asia indices since 2007.
