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Herman Trend Alert: Consumer Confidence Looking Up

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By Herman Trend
Published:

For the fourth month in a row, The Conference Board Consumer Confidence
Index has increased sharply in the United States. The Index now stands
at 54.9 (1985=100), up almost 35 percent from in April (40.8). The
Conference Board’s Present Situation Index increased to 28.9 from 25.5
last month and its Expectations Index rose to 72.3 from 51.0 in April.
The Consumer Confidence Index is now at its highest level in eight
months.

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The moderate improvement in current conditions is reflected in
continued gains in the Present Situation Index. Growth in the second
quarter is likely to be less negative than in the first. While
confidence is still weak historically speaking, consumers are
significantly less pessimistic than they were earlier this year.
Concurrently, expectations are that business conditions, the labor
market and incomes will improve in the coming months — good news for
business executives everywhere on the planet.

In another important study, released last week by Harris Interactive,
there are more indications of recovery in the U.S. market. More U.S.
residents are now saying they will eat out and spend on entertainment
(from 74 percent to 66 percent). The entertainment industry fared
slightly better: from 74 percent to 64 percent and that is an
improvement of over 15 percent.

While the majority of people are still inclined to decrease spending on
eating out and entertainment, the numbers are better than they had been
two months ago. In other words, though the numbers are still not good,
they are not as bad as have been.  

Big-ticket items continue to experience problems with more than
three-quarters of people saying they are not likely to buy a new
computer (79 percent), move to a different residence (81 percent), buy
or lease a new car, truck or van (88 percent), purchase a house or
condo (91 percent), start a new business (92 percent) or buy a boat or
recreational vehicle (95 percent).

These numbers are all very similar to March, so people are still not
ready to spend on the large purchases. While these signs are positive,
Herman Group believe that we can expect only modest gains in the U.S.
economy for the foreseeable future and that will drive continued pain
elsewhere around the globe.

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