A Tale of Two Indexes: Consumer Confidence Versus Spending

Source: http://www.flickr.com/photos/lsuchick142/

Source: http://www.flickr.com/photos/lsuchick142/

Two reports measuring economic indicators are offering two conflicting views on the economy. Each was published in the days following the deal in Washington that ended the government shutdown, and pushed the deadline for the next debacle over the budget and debt-ceiling to early 2014.

First up is the Bloomberg Consumer Confidence Index. Poll respondents did not have a positive outlook on the economy, especially given the recent government shutdown. The index declined to minus 36.1 in the period ending October 20. This is the lowest number Bloomberg received since February’s minus 34.1.

Poll participants showed an increased hesitance to make purchases, and the “buying-climate” measure fell from minus 36.9 to minus 38.3. Their views on the overall economy posted the weakest numbers since October of last year clocking in at minus 68.2. All of the data from the poll compiled together leads to the conclusion that consumer confidence reached an eight month low last week.

The International Council of Shopping Centers (or, ICSC) and Goldman Sachs Group partner to deliver a weekly index as well. The index measures nominal same-store or comparable-store sales, but does not take into account restaurants or automotive sales. According to this index, retail sales for the period ending October 19 increased 1.4 percent over the prior week. The year-over-year improvement was 3.4 percent, the highest gain in five weeks.

ICSC Vice President of Research and Chief Economist Michael Niemira said in the press release for the index that “[a]s the federal government shutdown came to an end, consumers were seemingly back in a mood to shop.” Niemira went on to say, “the ICSC-Goldman Sachs consumer channel-checking survey suggested that demand was very uneven by store type.”

A comparable consumer contradiction came in the National Retail Federation (or, NRF) holiday forecast released on October 16, one day before the government shutdown ended, indicated the NRF expected sales to grow during the holiday months by 3.9 percent to $602.1 billion. The NRF estimates that on average, a holiday shopper in 2013 will spend $737.95 on the miscellany of goods associated with U.S. holiday seasons from cards to gifts. Last year, purchases per person averaged $752.24.

Consumer confidence measure individual’s optimism or pessimism about the state of the economy, and whether or not they are willing to make purchases. High consumer confidence tends to correlate with higher levels of spending, which helps boost the economy. The low consumer confidence Bloomberg found does not match the actual spending of the previous week the ICSC reported.

Two indexes providing contradictory data, as well as the NRF saying that consumers will spend less but the industry overall will grow are, at best moderate outlooks for the upcoming holiday season. On the one hand, a positive week for the retail industry, and the potential that this holiday season will see more spending can help move the economy along. On the other, consumers are voicing concern about financials, and are unwilling to commit to a hard set of data about spending.

Consumers, like Washington, appear to be in limbo, waiting for a sign that will allow a definite positive or negative. Washington lurching from one manufactured fiscal crisis to the next is causing the economy to also sway unpredictably.

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