US consumer confidence index
Previously, we have seen that the residential real estate market and vehicle sales are on an uptick. In this part, we’ll look at the US consumer confidence index, as it helps in getting a sense of consumer sentiment. The data is compiled by the University of Michigan and Thomson Reuters, and is reported on a monthly basis. The Survey Research Center conducts the underlying survey, which consists of at least 500 telephone interviews involving a cross section of consumers in the continental United States.
Each monthly survey contains about 60% new responses, and the remaining 40% comes from repeat respondents. The repeat surveys help reveal the change in consumer sentiment over time. The index rises when consumers gain confidence in the economy.
Index holds steady
The consumer confidence index reached an 11-year high of 98.1 in January. The index stood at 93 in the latest reading in March. Though consumer confidence has fallen from its peak, it still holds above 90. This is the fourth straight month where the consumer confidence index has been above 90. The consumer confidence index was last above 90 in July 2007.
A positive sign
One of the reasons driving higher home and vehicle sales is the improved confidence in US consumers. To get into a long-term commitment, like buying a house or a car, consumers need to have some degree of confidence about their future income.
Steel companies like Commercial Metals Company (CMC), US Steel (X), Companhia Siderurgica Nacional (SID), and Steel Dynamics (STLD) benefit from higher consumer confidence. Currently US Steel forms 3.24% of the SPDR S&P Metals and Mining ETF (XME).
While consumer confidence has been steady, lower energy prices have negatively impacted steel companies. We’ll discuss this in detail in our next part.