Consumer Sentiment Index
The CSI (Consumer Sentiment Index) is a key indicator that gauges the average US consumer’s confidence level. Thomson Reuters and the University of Michigan release the US CSI every month. The index rises when consumers gain confidence in the economy.
Sentiment drops to a six-month low
The Thomson Reuters and University of Michigan’s final May 2015 reading on overall consumer sentiment came in at 90.7. This is weak compared to a reading of 95.9 for April. The reading for May was the lowest since November 2014. However, the final reading was higher from a very weak preliminary reading of 88.6.
Consumer expectations for the US economy have moderated. The decline in optimism was spread across the country among all age and income groups. Even though the interviewed consumers didn’t expect rapid growth like they did last year, half of the interviewed consumers still viewed the economic outlook favorably.
According to the report, 86% of the households surveyed expect their financial situation to either remain the same or improve in the rest of 2015, while only 12% expect it to get worse.
Fallout on gold
Weakening consumer sentiment usually indicates declining incomes and negative prospects for the economy. This leads to weakening of the US dollar. It makes gold more attractive.
As a result, low sentiment is positive for gold (GLD) and gold stocks like New Gold (NGD), Yamana Gold (AUY), Newmont Mining (NEM), and Agnico Eagle Mines (AEM). It’s also positive for ETFs that invest in these stocks like the VanEck Vectors Gold Miners ETF (GDX). New Gold, Yamana Gold, and Newmont Mining account for 2.2%, 4.1%, and 5.5% of GDX’s total holdings, respectively.
However, you shouldn’t look at this indicator in isolation like all of the other indicators. In the next part of this series, we’ll see if US consumer spending also indicates a weak pattern.