Higher consumer confidence index
Previously, we discussed the uptick in the US real estate sector. In this part, we will look at the US consumer confidence index, which helps to assess consumer sentiment. This data is compiled by the University of Michigan and Thomson Reuters and is reported on a monthly basis.
Consumer confidence steady
The above chart shows the US consumer confidence index. The index stood at 95.4 in the latest reading in February. This index was revised upward from the preliminary reading of 93.6. This is the third straight month where the consumer confidence index has been above 90. The consumer confidence index was last above 90 in July 2007.
A higher consumer confidence index is positive for automobile sales. Vehicle sales in February 2015 were 16.16 million units on a seasonally adjusted annual rate, an increase of more than 5% over February 2014. Higher vehicle sales are a positive indicator for copper producers like Freeport-McMoRan (FCX), Southern Copper (SCCO), Teck Resources (TCK), and Glencore Plc. (GLNCY). Freeport currently forms 3.41% of the iShares US Basic Materials ETF (IYM) and 3.25% of the SPDR S&P Metals and Mining ETF (XME).
Strong job market
One of the reasons for higher consumer confidence has been the improvement in the job market. Payrolls have been strong, and the unemployment rate has fallen to 5.5%.
Plus, lower gasoline prices put more money into the hands of US consumers. Higher disposable income, coupled with steady consumer confidence, bodes well for the sales of consumer discretionary products like appliances. Copper is used in the manufacture of almost all electrical equipment.
However, lower crude oil prices will hurt Freeport’s energy exploration business, which we will discuss in detail in the next article.