How will consumption shape investments after the payrolls report?

Part 9
How will consumption shape investments after the payrolls report? (Part 9 of 12)

Why last week saw the highest consumer confidence since 2007

Consumer sentiment

This article covers two indicators measuring consumer sentiment: the Bloomberg Consumer Comfort Index (or Bloomberg CCI), due to release on Thursday, April 10, and the Thompson Reuters/University of Michigan Surveys of Consumers, due to release on Friday, April 11. While the Bloomberg CCI is a weekly release, the Thompson Reuters/University of Michigan Surveys of Consumers are issued monthly and form part of the Conference Board’s Leading Indicators Index (or LEI). Consumer sentiment measures have historically highly correlated with macro-economic variables such as stock performance, GDP growth, and employment.

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What is the Thompson Reuters/University of Michigan Surveys of Consumers?

The Thompson Reuters/University of Michigan Surveys of Consumers is based on the telephonic survey responses of 500 randomly selected individuals from across the country (excluding Alaska and Hawaii). The Survey’s ~50 questions, covering personal finances, business conditions in the economy, and future buying plans, are designed to measure consumer confidence in the economy. An increase in the reading indicates that consumer sentiment has improved, while a decrease indicates the reverse. The sentiment reading for March came in at a lower-than-expected 79.6, down from the 81.6 reported in February and 81.2 in January.

What is the Bloomberg CCI?

A weekly release conducted by Langer Research Associates, the Bloomberg CCI is based on 250 random-sample telephone interviews. It measures how Americans view the economy. Index values are computed based on a four-week rolling average of interview responses. The survey interview seeks the views of respondents on three major issues: how Americans rate the U.S. economy, whether consumers should schedule the purchases they need at the present time or postpone them, and how consumers’ personal finances are faring. The proportionate number of negative views on the above issues is subtracted from the share of positive views, and the result is divided by 3. A reading of 100 indicates that every survey respondent had a positive view, whereas a reading of -100 indicates the opposite.

Last week’s Bloomberg CCI caps the best first quarter since 2007

Last week’s reading (for the week ended March 30) came in at -30, up from the -31.5 recorded the previous week, as consumer sentiment showed slight improvement. The increase was attributed to lower initial jobless claims for the week and gains in hiring. Two of three sub-indices (namely, how consumers view their personal finances and buying climate) increased, while the sub-index, which measured how Americans rate the economy, stayed put from the previous week.

The next part of this series will look at the impact of consumer sentiment indices like the Bloomberg CCI and the Thompson Reuters/University of Michigan Surveys of Consumers on both fixed (AGG) and equity (DVY) markets. We’ll look at the impact on companies like Proctor & Gamble (PG) and energy company Conoco Philips (COP) as well as floating-rate ETFs like the iShares Floating Rate Bond (FLOT) and the Market Vectors Investment Grade Floating Rate ETF (FLTR). To find out more, read on to Part 10.

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